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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
----------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (Fee Required)
For Fiscal Year Ended December 31, 19951998
Commission file number 33-586311-7940
GOODRICH PETROLEUM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0466913
(STATE OF INCORPORATION)(Exact name of registrant as specified in its charter)
Delaware 76-0466193
(State of incorporation) (I.R.S. IDENTIFICATION NO.Employer Identification No.)
5847 SAN FELIPE, SUITESan Felipe, Suite 700
HOUSTON, TEXASHouston, Texas 77057
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code is (713) 780-9494
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTEREDName of each exchange
Title of each class on which registered
------------------- -----------------------
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.20 par value.....................value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Series A Preferred Stock, $1.00 par value.........value NASDAQ Small Cap
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
At March 15, 1996,26, 1999 there were 41,804,5105,247,705 (adjusted for reverse stock split)
shares of Goodrich Petroleum Corporation common stock outstanding. The
aggregate market value of shares of common stock held by non-affiliates of the
registrant as of March 15, 199623, 1999 was approximately $24,490,000$5,903,668 based on a
closing price of $.8125$1.125 per share on the New York Stock Exchange on such date.
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1
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT PART/ITEM OF INCORPORATIONDocument Part/Item of Incorporation
-------- -------------------------------------------------------
Proxy Statement for the 1999 Annual Meeting of
Shareholders Part III, Item 10, 11, 12, 13
1996 Annual Meeting of Shareholders
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PART I
ITEMSItems 1 ANDand 2. BUSINESS AND PROPERTIES.Business and Properties.
General
Goodrich Petroleum Corporation and subsidiaries (Goodrich)("Goodrich" or "the
Company") is an independent oil and gas company engaged in the exploration,
development, production and acquisition of oil and natural gas properties in
the onshore portions of the United States, primarily the states of Louisiana
and Texas. In addition to itsThe Company owns working and overriding royalty interests in 91
active oil and gas activities,wells located in 37 fields in eight states. At December 31,
1998, Goodrich owns a 20% non-operated interest in ahad estimated proved reserves of approximately 3,093,000
barrels of oil and condensate and 28.1 Bcf of natural gas, pipeline joint venture andor an equity interestaggregate of
46.7 Bcfe with a pre-tax present value of future net revenues, discounted at
10%, of $40.63 million.
The Company's principal executive offices are located at 5847 San Felipe,
Suite 700 Houston, Texas 77057. The Company also has offices in Marcum Natural Gas Services
(Marcum), a publicly held diversified provider of products and services toShreveport,
Louisiana. At March 2, 1999 the natural gas industry.Company had 16 employees.
Company Background
Goodrich and its subsidiaries are the result ofresulted from a business combination on August 15, 1995 between
La/Cal Energy Partners (La/Cal)("La/Cal") and Patrick Petroleum Company and
subsidiaries (Patrick)("Patrick"). La/Cal was a privately held independent oil and gas
partnership formed in July 1993 and engaged in the development, production and
acquisition of oil and natural gas properties, primarily in Southern
Louisiana. Patrick was a publicly tradedNYSE-listed independent oil and gas company engaged
in the acquisition of producing properties and the exploration, production, development and productionacquisition of oil and natural
gas properties in the continental United States. Patrick's oil and gas
operations and properties were primarily located in West Texas and Michigan at
the time of the combination, with additional operations and properties in
certain western states.
The combination transactions were accountedOn January 31, 1997, the Company acquired the oil and gas properties of
La/Cal Energy Partners II ("La/Cal II") and certain working interest owners
for as a purchase business
combinationprice of $16.5 million ("La/Cal II Acquisition"). The purchase
price was comprised of $1.5 million in accordance with Accounting Principles Board Opinion No 16,
Business Combinations whereby La/Cal was deemed to becash, the acquiror and Patrick
the acquiree. Accordingly, the consolidated financial statements and other
operating data presented herein reflect the operationsassumption of $7.5 million of
La/Cal on a stand
alone basis for periods prior to August 15, 1995, whereas such information
reflectsII long-term debt and the operationsissuance of 750,000 shares of Series B
convertible preferred stock of the combined entities for periods subsequent to
August 15, 1995.
The Company's principal executive offices are located at 5847 San Felipe,
Suite 700 Houston, Texas 77057. The Company also has offices in Shreveport,
Louisiana. At March 1, 1996, the Company had 11 employees.("Series B Preferred Stock") with
an aggregate liquidation value of $7.5 million.
Oil and Gas Operations and Properties
At December 31, 1995, Goodrich had estimated proved reservesThe following is a summary description of approximately 940.15 Mbbls of oil and condensate and 18.88 Bcf of natural gas,
or an aggregate of 24.52 Bcfe with a pre-tax present value of future net
revenues, discounted at 10% of $30.4 million, of which approximately 85% are
classified as proved developed.
The Company owns working and overriding royalty interests in 81the Company's oil and gas
wells located in 41 active fields in 9 states.properties.
Louisiana
Substantially allThe majority of the Company's proved natural gas reserves are in the
Southern Louisiana producing region. The Southern Louisiana producing region
refers to the geographic area which covers the onshore and in-land waters of
South Louisiana lying in the southern one-half of the state of Louisiana.
The South Louisiana,
producing regionwhich is one of the world's most prolific oil and natural gas producing
sedimentary basins. The region generally contains sedimentary sandstones which
are of high qualities of porosity and permeabilities. There are a myriad of
types of reservoir traps found in the region. These traps are generally formed
by faulting, folding and subsurface salt movement or a combination of one or
more of these. Salt movement has resulted in a large number of shallow
piercement salt domes as well as deeper movements, which have resulted in both
large and small anticlinal structures.
2
The formations found in the SouthSouthern Louisiana producing region range in
depth from 1,000 feet to 20,000 feet below the surface. These formations range
from the Sparta and Frio formations in the Northernnorthern part of the region to
Miocene and Pleistocene in the Southernsouthern part of the region. The Company's
production comes predominately from Miocene and Frio age formations.
2
Kings Ridge 96 Field. Kings Ridge 96 is located in Lafourche Parish,
Louisiana. King's Ridge Field was discovered by Natural Gas and Oil Company in
1954. The field is set up geologically by three main faults which strike east-
west and create hydrocarbon traps on the downthrown side of the faults.
Typically, these downthrown traps are three-way structures that produce from
Miocene sands ranging in depth from 9,000' to 13,000'.
Goodrich has acquired approximately 307 acres from the Lafourche Parish
School Board and 114 acres from the Grandison Trust. Goodrich as operator has
drilled and completed three wells in the field to date and has an approximate
50% working interest.
Isle St. Jean Charles Field. Isle St. Jean Charles Field is located in
Terrebonne Parish, Louisiana. The field is a northwest extension of the Bayou
Jean LaCroix Field located in the southeastern part of the Parish. These
fields are trapped on a four-way closure downthrown on a major east-west
trending down to the south fault. Production is from multiple Miocene-aged
sands which are normally pressured and range in depth from 9,000 feet to
13,000 feet. The field was developed primarily in the 1950's by Exxon and
reservoirs have exhibited both depletion and water drive mechanisms. To date,
these fields have produced in excess of 51 billion cubic feet of gas and 6.52
million barrels of oil and condensate. There are currently five active wells
producing in these fields.
Goodrich acquired its working interest in its leasehold of approximately 425
acres through both acreage acquisitions and a farmout from Fina, et al. In
December 1997, Goodrich drilled the Dupont 38 #1 well. Goodrich is operator
and holds an approximate 38% working interest.
Second Bayou Field. The Second Bayou Field is located in Cameron Parish,
Louisiana and was discovered in 1955 by the Sun Texas Company. Goodrich is the
operator of seven producing wells, six of which are dually completed, and has
an average working interest of approximately 29% in 1,395 gross acres. To
date, the field has produced over 422 Bcf of natural gas and 2.7 million
barrels of oil from multiple Miocene aged sands ranging from 4,000 to 15,200
feet. Goodrich drilled and dually completed the Miami Fee No. 9 and No. 10
during 1998 based off of subsurface control and 3-D seismic which was shot in
1997. The two wells average 1,052 barrels of oil per day and 1.5 million cubic
feet of gas per day during December 1998.
Other major operators in the area are Fina Oil and Chemical Company, Texaco
Exploration and Producing , Inc. and Newfield Exploration.
Lake Raccourci Field. The Lake Raccourci Field was discovered by Humble Oil
and Refining Company ("Exxon") in 1949, with the field extended to the South
by Pan American ("Amoco") in 1958. Geologically, the field is a large four-way
dipping closure which is cross-cut by numerous Northeast-Southwest striking
down to the South faults. The field has produced from a minimum of eighteen
different Miocene age sandstones, which range in depth from 9,000 to 16,500
feet. These normally and abnormally pressured reservoirs exhibit depletion,
water and combination drive mechanisms, and have produced in excess of 832
billion cubic feet of gas and 20 million barrels of oil and condensate. There
are currently nine producing wells in the field.
Goodrich acquired its average 20% working interest in the field through a
farmout from MW Petroleum ("Apache") in July 1996 and a separate farmout from
Exxon. The Company controls approximately 1,079 acres in the field and is
currently evaluating 3D seismic for further exploitation opportunities.
Pecan Lake Field. The Pecan Lake fieldField was discovered in 1944 by the
Superior Oil Company. Geologically, the field is comprised of a relatively low
relief four-way closure and multiple stacked pay sands. The Pecan Lake fieldField
comprises approximately 870 gross leased acres in Cameron Parish, Louisiana,
approximately 42 miles southeast of Lake Charles, Louisiana. The field has
produced from over 15 Miocene sands ranging in depths from 7,500 to 11,800
feet, which have been predominately gas and gas condensate reservoirs. These
sand reservoirs are characterized by generally widespread development and
strong waterdrive production mechanisms. The field has produced in excess of
343348 Bcf of gas and 590,000680,000 barrels of condensate. All the field production to
date has come from reservoirs which are of normal pressure. In May 1992, La/Cal enteredThe Company is the
Pecan Lake field under a farmout arrangementoperator of five producing wells with Mobil, whereby Mobil retained a one-eighth overriding interest in the
prospectively developed wells subject to the farmout. In April 1993, La/Cal
leased an additional 133.24 gross acres in the Pecan Lake field from Miami
Corp. for approximately $62,000. In March 1994, La/Cal acquired (i) all of
Mobil's interest in La/Cal's actual and prospectively drilled wells, (ii) a
43.10% working interest in Mobil's Miami Corp. S13, B15 and B16 wells, and
(iii) a 2.26% overriding royalty interest in Mobil's Cutler #1 wells for
approximately $2.11 million. Pecan Lake consists of seven well completions
through six well bores. The Company's working interests rangeranging from
approximately 43.11%43% to 47.38%47%.
The Company's average daily production at
Pecan Lake was 37.02 Bbls of oil and and/or condensate and 3.14 Mmcf of
natural gas during 1995. As of January 1, 1996, the Company's interests in the
Pecan Lake field had proved reserves of 104.66 Mbbls of oil and condensate and
9.97 Bcf of natural gas.
Lake Charles3
Ada Field. The Lake Charles fieldAda Field was discovered by the CaliforniaHope Producing Company (Chevron) in 1959.1945.
The field is located in Bienville Parish, in North Louisiana. Geologically,
the field consists of an upthrown
structural closure that is bounded to the South by an East-West trending down
to the South fault. The Lake Charles field currently consists of three
producing wells located on approximately 443 gross leased acres in Calcasieu
Parish, Louisiana,a turtle feature between two salt domes exhibiting a four-way
anticline with two main horst blocks, a main graben block, and adjacent to the City of Lake Charles, Louisiana.several
compensating faults. The field has produced from five different formations which are all Frio age
sandstones. These formations rangenumerous Lower Cretaceous
sands and lime facies, with the sands being predominately lenticular in
depthdeposition. The producing interval for the field ranges from 7,5004,500 to 10,000
feet, to 9,100 feet. The
fieldwith the production being primarily a pressure depletion mechanism. Ada
Field has produced from reservoirs which have had both waterdrive and pressure
depletion mechanisms. The Lake Charles field has produced, in excess of 17.3over 656 Bcf of natural gas and 366,0005.2 million barrels of condensate from seven different wells. Alloil.
Goodrich has six producing wells in the field, two of the production to date has come from normally pressured reservoirs.
La/Cal acquired awhich were drilled
during 1998. Goodrich owns an approximate 43% working interest in the Glasscock-Chapman #1 well and
leased additional acreage outside the Glasscock-Chapman #1 unit from Chevron
and two smaller working interest owners for $105,483 in February 1992. Since
then, La/Cal has leased an additional 206 gross acres from several smaller
landowners for approximately $155,000. On December 1, 1993, La/Cal acquired a
50% working interest from Foster-Brown Company in the Nickerson Fee well and
an additional 2.73% working interest in the City of Lake Charles #1 well for
$1,250,000. Currently, the Company owns working interests that range from
29.24% to 50.00% in the five producing wells in the Lake Charles field. The
Company's average total daily production at the Lake Charles field was 36.06
Bbls of oil and condensate and 2.11 Mmcf of natural gas during 1995. As of
January 1, 1996, the Company's interest in the Lake Charles field had proved
developed reserves of 149.96 Mbbls of oil and 2.08 Bcf of natural gas.
Other. The Company maintains ownership interests in acreage and wells in
several additional fields in Louisiana, including the (i) Opelousas field,Field,
located in St. Landry Parish, Louisiana (ii) Ada field,Sibley Field, located in BienvilleWebster Parish,
Louisiana, and (iii) Calhoun field,City of Lake Charles Field, located in OuachitaCalcasieu Parish, Louisiana.(iv) Deep Lake
Field, located in Lafourche Parish, (v) Mosquito Bay Field, located in
Terrebonne Parish, (vi) South Pecan Lake Field located in Cameron Parish,
(vii) Charenton Field located in St. Mary Parish and (viii) E. Roanoke Field,
located in Jefferson Davis Parish.
Texas
Goodrich explores and has oilproduction in the western, eastern and gas properties in West Texas as a resultsouthern
regions of former
Patrick holdings and operations.
3
Patrick'sTexas.
The Company's primary exploration focus in this area was toward the development
of economic drilling targets using three dimensional ("3-D") seismic
technology. Recent industry advances in high-resolution 3-D seismic technology
have facilitated an improvementWest Texas is in the success rate for explorationHorseshoe
Atol area in Dawson and Gaines Counties. The Company is actively developing
drilling prospects through the integration of smaller
but prolific reefs. This has been accomplished by 3-D imaging the optimum
drilling locations on these prospects, therefore minimizing edge and marginal
well completions and improving the overall recoveries per well. Patrick
participated in overapproximate 375 squaressquare miles
of 3-D seismic acquisitionit owns in the area with subsurface geology.
Sean Andrew Field. Sean Andrew was discovered by the Company in 1994
utilizing the Company's 375 square mile 3-D seismic database in West Texas.
The Company is the operator in the field and holds an approximate 37.5%
working interest in the field.
Marholl Field. The Marholl Field is a Siluro-Devonian (Fussellman) Field in
Dawson County discovered in 1995 through the use of 3-D seismic. The Company
operates two wells in the field with an approximate 23% working interest.
Mary Blevins Field. The Mary Blevins Field is located in Smith County, Texas
and drilled Pennsylvanian ("Penn") Reef and Fusselman prospects
generatedwas a new discovery which is fault separated from Hitts Lake Field which
was discovered in 1953 by Sun Oil. Currently there are four producing wells in
this technology. The Company owns two Geoquest work stations,
which are being utilized to interpret and map its 3-D data.
The Company's most significant West Texas producing properties are locatedfault block with Goodrich, as operator, having approximately a 48%
working interest in Sean Andrew Field, Dawson County, Texas. The Company's average net daily
production at Sean Andrew Field was 419.10 Bblsapproximately 782 gross acres. To date, Hitts Lake has
produced over 14 million barrels of oil and .18 Mmcf of natural
gas from August 15, 1995 through December 31, 1995. The Sean Andrew FieldMary Blevins has produced in excessover
414,000 barrels from the Paluxy, which occurs at a depth of 325,000 Bbls of oil and .12 Bcf of gas gross to the
working interest owners.
In addition to the West Texas interests, theapproximately
7,300 feet.
Other. The Company maintains ownership interests in acreage and wells in
several additional fields in Texas including the (i) North Rich Ranch field,Ackerly Field, located in
Liberty County, Texas,Dawson and Howard Counties, (ii) North Bammel
field,Lamesa Farms Field, located in HarrisDawson County, Texas,
(iii) Carthage (Bethany) field,Field, located in Panola County, Texas and (iv) Oakhurst field,N.W. Ackerly
Field, located in Dawson County, (v) Midway Field located in San JacintoPatricio
County, Texas.(vi) East Jacksonville Field located in Cherokee County, (vii) Mott
Slough, located in Wharton County, (viii) Falls City Field, located in Karnes
County and (ix) Mikeska-Hamill Field, located in Austin County.
Australia
Goodrich has interest in three exploration permits in the Carnarvon Basin of
Western Australia.
The developmental stage of the offshore Carnarvon Basin of Western Australia
is comparable to the Gulf of Mexico in 1950. The Carnarvon Basin is two-thirds
the size of the Gulf of Mexico and has produced in excess
4
of 4.3 TCF and 550 million barrels of oil from less than 1000 wells. In
comparison, the Gulf of Mexico has produced approximately 104 TCF of gas and 9
billion barrels of oil from 30,000 wells. The Carnarvon Basin retains
significant exploration potential. Additional strengths of the basin include
large inexpensive acreage blocks, vast available geological and geophysical
data sets, existing and expanding petroleum infrastructure and increasing
domestic demands for natural gas.
EP-395. Goodrich Petroleum acquired a 20% non-operated working interest in
the 240 square kilometer Exploration Permit in 1995. The Permit is
approximately 30 km east from Barrow Island Field which has produced 300
million barrels of oil and 85 km southwest and on trend with the recent
Wandoo, Stag and Reindeer discoveries. Since 1995, the partners have
reprocessed the original 2-D seismic data sets, shot a 38 km 3-D seismic
survey (1995), and shot an additional 93 km of high quality 2-D seismic
(1997). Interpretation of this data has confirmed two separate prospects:
Lindsay and West Boyd. These prospects are structural closures with associated
seismic amplitude anomalies. The primary objective for these prospects is the
Mardie Greenstone. This objective is a late cretaceous age, shallow marine
sandstone with porosities ranging up to 33%. A well is anticipated to be
drilled on the Lindsay prospect in late 1999. Carnarvon Petroleum N.L. is the
operator of this permit.
EP-396. The Company acquired a 33% non-operated working interest in 1995.
EP-396 encompasses 400 square kilometers and is in close proximity to EP-395.
The partnership has reprocessed and interpreted the available 2-D seismic data
sets. One strong lead has emerged from the seismic data, which is a prospect
called the Nolan Prospect. This prospect is a downthrown three way closure
along the major down to the west Candace fault system. The available 2-D
seismic data set indicates an associated seismic amplitude anomaly. TAP Oil
N.L. is the operator of EP-396.
EP-397. This Permit is 160 square kilometers and the Company has a 33%
working interest. The 130 km of available seismic has been reprocessed and
interpreted with several promising prospect leads. This Permit is in the
earliest stages of exploratory investigation as compared with EP-395 and
EP-396.
Oil and Natural Gas Reserves
The following table setstables set forth summary information with respect to the
Company's proved reserves as of January 1, 1996,December 31, 1998 and 1997 as estimated by the
Company by compiling the reserve information, substantially all of which was
prepared by severalthe engineering firmsfirm of Coutret and the Company internally.Associates, Inc.
NET RESERVES
----------------------
PRESENT
VALUE OF
FUTURE
NET
OIL GAS REVENUES
CATEGORY (MBBLS) (BCF) BCFE (1) (IN MILLIONS)December 31, 1998
--------------------------------------------
Net Reserves Pre-Tax Present
---------------------------- Value of Future
Oil Net Revenues
Category (Bbls) Gas (Mcf) Bcfe(1) (in millions)
-------- --------- ---------- ------- ----- -------- ----------------------------
Proved Developed Producing (Pre-tax)...... 725.06 10.27 14.62 $ 21.67Developed............. 2,266,854 21,481,946 35.1 $31.99
Proved Developed Non-Producing (Pre-tax).. 195.50 3.54 4.71 4.03Undeveloped........... 825,956 6,662,364 11.6 8.64
--------- ---------- ---- ------
Total Proved............... 3,092,810 28,144,310 46.7 $40.63
========= ========== ==== ======
December 31, 1997
--------------------------------------------
Net Reserves Pre-Tax Present
---------------------------- Value of Future
Oil Net Revenues
Category (Bbls) Gas (Mcf) Bcfe(1) (in millions)
-------- --------- ---------- ------- ---------------
Proved Undeveloped (Pre-tax).............. 19.59 5.07 5.19 4.66Developed............. 2,292,626 16,600,669 30.4 $41.86
Proved Undeveloped........... 1,805,764 20,969,945 31.8 36.24
--------- ---------- ---- ------
----- ----- -------
Total Proved (Pre-tax)................ 940.15 18.88 24.52 $ 30.36Proved............... 4,098,390 37,570,614 62.2 $78.10
========= ========== ==== ====== ===== ===== =======
Standardized Measure of Discounted Future
Net Cash Flows............................ $ 26.88
=======
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(1)Estimated by the Company using a conversion ratio of 1.0 Bbl/6.0 Mcf.
5
There are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
Company. Reserve engineering is a subjective process of estimating underground
accumulations of crude oil, condensate and natural gas that cannot be measured
in an exact manner, and the accuracy of any reserve estimate is a function of
the quality of available data and of engineering and geological interpretation
and judgment. The quantities of oil and natural gas that are ultimately
recovered, production and operating costs, the amount and timing of future
development expenditures and future oil and natural gas sales prices may all
differ from those assumed in these estimates. Therefore, the Present Value of
Future Net Revenues amounts shown above should not be construed as the current
market value of the estimated oil and natural gas reserves attributable to the
Company's properties.
In accordance with the Commission's guidelines, the engineers' estimates of
future net revenues from the Company's properties and the Present Value of
Future Net Revenues thereof are made using oil and natural gas sales prices in
effect as of the dates of such estimates and are held constant throughout the
life of the properties 4
except where such guidelines permit alternate
treatment, including the use of fixed and determinable contractual price
escalations. The weighted average prices as of December 31, 19951998 used in such
estimates were $2.01$2.24 per Mcf of natural gas and 17.90$9.37 per Bbl of crude
oil/condensate. Oil prices have subsequently increased while gas prices have
subsequently declined from December 31, 1998 levels.
Productive Wells
The following table setstables set forth the number of active well bores in which the
Company maintains ownership interests as of December 31, 1995:1998:
GROSS (1) NET (2)
---------Oil Gas Total
--------------- --------------- ---------------
Gross(1) Net(2) Gross(1) Net(2) Gross(1) Net(2)
-------- ------ -------- ------ -------- ------
Louisiana--Pecan Lake...................................
California.............. -- -- 4.00 2.09 4.00 2.09
Colorado................ -- -- 1.00 .30 1.00 .30
Louisiana............... 12.00 5.02 30.00 11.19 42.00 16.21
Michigan................ 2.00 .26 5.00 .05 7.00 3.15
Louisiana--Lake Charles................................. 3.00 1.06
Texas--Sean Andrew...................................... 6.00 2.24
Other................................................... 60.00 9.70.31
Mississippi............. -- -- 1.00 .05 1.00 .05
New Mexico.............. -- -- 1.00 .03 1.00 .03
Texas................... 28.00 11.82 5.00 .75 33.00 12.57
Wyoming................. 2.00 .32 -- -- 2.00 .32
----- ----- ----- ----- ----- -----
Total Productive
Wells.............................. 76.00 16.15Wells................ 44.00 17.42 47.00 14.46 91.00 31.88
===== ===== ===== ===== ===== =====
- - --------
(1)Does not include royalty or overriding royalty interests.
(2)Net working interest.
Productive wells consist of producing wells and wells capable of production,
including gas wells awaiting pipeline connections. A gross well is a well in
which the Company maintains an ownership interest, while a net well is deemed
to exist when the sum of the fractional working interests owned by the Company
equals one. Wells that are completed in more than one producing horizon are
counted as one well. Of the gross wells reported above, eight had multiple
completions.
6
Acreage
The following table summarizes the Company's gross and net developed and
undeveloped natural gas and oil acreage under lease as of December 31, 1995.1998.
Acreage in which the Company's interest is limited to a royalty or overriding
royalty interest is excluded from the table.
GROSS NET
----- ---Gross Net
------- ------
Developed acreage
Louisiana--Pecan Lake Field.......................... 870.63 400.10
Louisiana--Lake Charles Field........................ 443.00 182.70
Texas--Sean Andrew Field............................. 240.00 89.77
Other................................................ 3,557.02 969.31California............................................... 1,280 568
Colorado................................................. 640 192
Louisiana................................................ 7,907 2,644
Michigan................................................. 1,920 19
Texas.................................................... 5,598 2,005
Wyoming.................................................. 80 13
Undeveloped acreage.................................... 12,153.37 3,159.78
--------- --------
Total.............................................. 17,264.02 4,801.66
========= ========acreage
Offshore Australia....................................... 197,682 57,985
Louisiana................................................ 1,795 1,524
Michigan................................................. 640 154
Texas.................................................... 2,400 1,257
------- ------
Total.................................................. 219,942 66,361
======= ======
Undeveloped acreage is considered to be those lease acres on which wells
have not been drilled or completed to a point that would permit the production
of commercial quantities of natural gas andor oil, regardless of whether or not
such acreage contains proved reserves. As is customary in the oil and gas
industry, the Company can retain its interest in undeveloped acreage by
drilling activity that establishes commercial production sufficient to
maintain the leases or by payment of delay rentals during the remaining
primary term of such a lease. The natural gas and oil leases in which the
Company has an interest are for varying primary terms; however, most of the
Company's developed lease acreage is beyond the primary term and is held by
producing natural gas and/or oil wells.
The Company participated in several farmout agreements with other owners of
natural gas and oil leases and is actively leasing acreage in Louisiana and
Texas.
Operator Activities
Goodrich Petroleum is the operator of record of every producing well in the
Pecan Lake field except the Cutler #1 well. Goodrich Petroleum is the operator
of the J.C. Nickerson #1 and Ursla Bracey #1 wells, while Samson Resources
Company operates the remainder of the wells in the Lake Charles field.
5
Goodrich Petroleum operates a majority in value of the Company's producing
properties, and will generally seek to become the operator of record concerningon
properties it drills or acquires in the future.
7
Drilling Activities
The following table sets forth the drilling activity of the Company since
1992. This information reflects La/Cal's operations on a stand alone basis
prior to August 15, 1995.for the
last three years. (As denoted in the following table, "Gross" wells refers to
wells in which a working interest is owned, while a "net" well is deemed to
exist when the sum of fractional ownership working interests in gross wells
equals one.)
YEAR ENDED DECEMBERYear Ended December 31
----------------------------------------
1992 1993 1994 1995------------------------------
1998 1997 1996
---------- --------- ---------
--------- ----------
GROSS NET GROSS NET GROSS NET GROSS NETGross Net Gross Net Gross Net
----- ---- ----- --- ----- --- ----- --- ----- ----
DevelopmentDevelpment Wells:
Productive........................... 8.0Productive............................... 6.00 2.77 6.0 2.6 2.0 .87 1.0 .43 1.0 .38
Non-Productive....................... 0.0 0.0 1.0 .08 1.0 .43 0.0 .00
--- --- --- --- --- --- --- ----
Total.............................. 8.0 2.6 3.0 .95 2.0 .86 1.0 .38
=== === === === === === === ====
Exploratory Wells:
Productive...........................0.4
Non-Productive........................... 2.00 1.47 0.0 0.0 0.0 0.0
0.0 0.0 1.0 .25
Non-Productive....................... 0.0 0.0 0.0 0.0 0.0 0.0 2.0 .68
--- --- --- --- --- -------- ---- ---- --- ---- Total.............................. 0.0 0.0 0.0 0.0 0.0 0.0 3.0 .93
=== === === === === ===---
Total.................................. 8.00 4.24 6.0 2.6 1.0 0.4
===== ==== ==== === ==== ===
Exploratory Wells:
Productive............................... 7.00 1.49 12.0 2.9 6.0 2.5
Non-Productive........................... 8.00 2.87 7.0 1.7 3.0 1.3
----- ---- ---- --- ---- ---
Total.................................. 15.00 4.36 19.0 4.6 9.0 3.8
===== ==== ==== === ==== ===
Total Wells:
Productive........................... 8.0 2.6 2.0 .87 1.0 .43 2.0 .63
Non-Productive....................... 0.0 0.0 1.0 0.8 1.0 .43 2.0 .68
--- --- --- --- --- ---Productive............................... 13.00 4.26 18.0 5.5 7.0 2.9
Non-Productive........................... 9.00 4.34 7.0 1.7 3.0 1.3
----- ---- ---- --- ---- Total.............................. 8.0 2.6 3.0 .95 2.0 .86 4.0 1.31---
Total.................................. 23.00 8.60 25.0 7.2 10.0 4.2
===== ==== ==== === ==== === === === === === === ====
Information prior to July 15, 1993 reflects pre-La/Cal formation drilling
activity.
During the periods 1993, 1994 and up to the business combination August 15,
1995. La/Cal was engaged in limited developmental drilling in the Pecan Lake
and Lake Charles Fields. La/Cal did not drill any exploratory wells during the
periods set forth above. The Company intends to maintain a more active
exploratory and developmental drilling
Net Production, Unit Prices and Costs
The following table presents certain information with respect to oil, gas
and condensate production attributable to the Company's interests in all of
its fields, the revenue derived from the sale of such production, average
sales prices received and average production costs during each of the years in
the three-year period ended December 31, 1995, 1994, 1993 and 1992.1998.
1995 1994 1993(1) 1992(1)1998 1997 1996
--------- --------- ------- ----------------
Net Production:
Natural Gasgas (Mcf)...................... 2,213,923 2,386,130 933,435 417,482
Oil.................................... 102,731 36,487 7,319 4,347....................... 2,782,825 2,449,320 1,623,377
Oil (barrels)........................... 316,768 282,380 165,964
Natural gas equivalents (Mcfe)......... 2,830,309 2,605,050 977,348 443,564 (1)...... 4,683,433 4,143,600 2,619,161
Average Net Daily Production:
Natural gas (Mcf)...................... 6,065 6,537 2,557 1,144....................... 7,624 6,710 4,448
Oil (Bbls)............................. 281 100 20 12.............................. 868 774 455
Natural gas equivalents (Mcfe)......... 7,754 7,137 2,678 1,215 (1)...... 12,832 11,354 7,176
Average Sales Price Per Unit:
Natural Gasgas (per Mcf).................. 1.72 1.85 2.02 1.94................... $ 2.18 2.55 2.60
Oil (per Bbl).......................... 16.27 15.99 16.65 19.80........................... 11.88 18.06 20.88
Other Data:
Lease operating expense and production
taxes (per Mcfe)..... .22 .15 .23 .25
Depreciation, depletion and
amortization (per Mcfe)............... .48 .40 .33 .65....................... $ .60 .56 .62
- - --------
(1) La/Cal ownership interest applied to pre La/Cal formation production.
6
Marketing
Pecan Lake Field. Goodrich Petroleum's natural gas production is transported
through various field gathering lines to a central facility in the field. The
gathering lines, and the central facility, are owned proportionatelyEstimated by the working interest owners in the Pecan Lake field wells, which include Goodrich.
From the central facility, Goodrich's gas production is delivered intoCompany using a gas
transmission line owned by Superior Offshore Pipeline Company ("SOPCO"). The
gas production is then transported under a transportation agreement, between
the operatorconversion ratio of 1.0 Bbl/6.0 Mcf.
8
Oil and SOPCO, to the Trident N.G.L. Inc. plant ("Trident"). The gas
production is then either processed by Trident, or bypassed to the Trident
distribution point. This activity is covered by a processing agreement between
the plantGas Marketing and the operator. This agreement provides in-part, that the plant
can elect to process the operator's gas, but is required to deliver a volume
of gas to the plant's distribution point, which is equal to the volume
delivered by SOPCO at the plant inlet. This is referred to as a "keep-whole"
agreement. At the plant tailgate, Goodrich's gas is delivered to one of the
several pipeline interconnects available at the plant distribution point.
These spot sales, or market-sensitive sales, are arranged by Seaber
Corporation of Louisiana ("Seaber").
In addition to the transmission lines available at the plant tailgate, there
is also a line owned by SOPCO that provides access to Columbia Gulf Pipeline
Company ("Columbia Gulf") and Texas Gas Transmission Company ("Texas Gas"). If
the operator elects to access these pipelines, the transportation is covered
under agreements between the operator and SOPCO for transportation to either
Columbia Gulf or Texas Gas.
From the central facility in Pecan Lake, Goodrich's gas condensate is
delivered into a low pressure pipeline which is owned by Grand Lake Liquids
Company ("Grand Lake"). The gas condensate is transported to the Grand Lake
tank farm under an agreement between Goodrich and Grand Lake Liquids.
Goodrich's gas condensate is sold to Mobil Oil Trading & Transportation
Company at the Grand Lake tank farm. Pricing for the condensate is based on
current market prices referred to as posted prices. Goodrich's contract with
Mobil is a 30-day rollover agreement.
Lake Charles Field.Major Customers
Marketing. Goodrich's natural gas production is transported through
a gathering line of approximately 2 miles in length to an interconnect with
Koch Gateway Pipeline ("Koch"). This gathering line is owned proportionately
by the working interest owners in the Lake Charles Field, which includes
Goodrich. The gas is sold at the Koch pipeline interconnect, to various
markets arranged by Seaber. Transportation on the Koch pipeline is arranged by
the individual markets. Pricing for the condensate is based on current market
prices referred to as posted price. The operators' contract with Seaber is
based on a 30-day, rollover agreement.
Sean Andrew Field Goodrich's oil production is gathered by pipeline and
purchased by Mobil at a premium over the posted price. The gas is purchased by
Pride Petroleum on a thirty day spot basis.
Remaining Fields. Goodrich's natural gas production in its remaining fields
is sold under spot or market-sensitivemarket-
sensitive contracts and to various gas purchasers on short-term contracts.
Goodrich's natural gas condensate in its remaining
fields is sold under short-term rollover agreements
based on current market prices. Customers. From July 15, 1993 through December 31, 1993 and during the year
ended December 31, 1994, Tenneco Gas purchased 70% and 41%, respectively of
La/Cal'sThe Company's crude oil and gas sales. During 1994, Seaber purchased 48% of La/Cal's oil
and gas sales. During 1995, Seaber purchased 90% of the Company's gas sales
and Mobil purchased 59% of the Company's oil sales.production is marketed
to several purchasers based on short-term contracts.
The Company has entered into an agreement with Natural Gas Ventures, L.L.C.
("NGV"), a Louisiana limited liability company, that affiliates of Goodrich
Oil Company formed in August 1994, to operate as an agent for the purpose of marketing
Goodrich Oilthe Company's and its contracting parties' natural gas. The Company and other
contracting parties contribute natural gas to NGV, which NGV then markets to
gas purchasers, pursuant to the Joint Venture Agreement between NGV and Seaber
(described below)Corporation of Louisiana ("Seaber"). The Company can terminate this agreement
on 60-days advance notice. The Company and the other contracting
parties are entitled to participate, on a pro rata basis, in any net profits
or equity benefits received by NGV under its Joint Venture
7
Agreement with Seaber, provided the Company and the other contracting parties
have not terminated the agreement and are delivering gas under the agreement
at the time the net profits and equity interest are earned. The Company believes its contract with NGV allows it to
realize higher prices for its contributed gas because of the greater market
power associated with larger volumes of gas than the Company would have for
sale on a stand-alone basis.
NGV has entered into aCustomers. Due to the nature of the industry the Company sells its oil and
natural gas marketing joint venture agreement (the
"Joint Venture Agreement") with Seaber whereby Seaber acts as agent for NGV in
its gas marketing efforts. Pursuantproduction to the Joint Venture Agreement, Seaber
arranges short-term gas sales contracts on behalfa limited number of NGV with gas purchasers and, NGV delivers to Seaber sufficient gas quantities to fulfill NGV's
contractual obligations. NGV can terminate the Joint Venture Agreement onaccordingly,
amounts receivable from such purchasers could be significant. Revenues from
these sources as a
60-days advance notice. During the term of the Joint Venture Agreement, on a
calendar year basis, NGV has the option to share in 50 percent of all
Seaber's' net profits provided that NGV meets certain scheduled delivery
requirements. Each year, twenty-five percent of NGV's share of Seaber net
profits is retained by Seabertotal revenues for the periods presented were as
an account payable, which Seaber uses as
additional working capital. Atfollows:
Year Ended
December 31,
----------------
1998 1997 1996
---- ---- ----
Seaber Corporation of Louisiana............................ 47% 44% 35%
Texaco..................................................... 12% 11% --
Navajo Refining Company.................................... 11% -- --
Mobil Oil Corporation...................................... -- 10% 22%
Mitchell Marketing Company................................. -- 9% 16%
Sales
During 1998, the end of the term of the Joint Venture
Agreement, and subject to delivering scheduled volumes of gas, NGV can elect
to convertCompany sold its cumulative accounts payable into fifty percent of the
outstanding Seaber common stock or can choose to receive the payable in cash.
As set forth above, provided certain conditions are met, NGV will distribute
the Seaber net profits and equity interests if any, to its contracting parties
on a pro rata basis.
Natural Gas Pipeline Joint Venture
Pecos Pipeline & Producing Company ("Pecos"), one of the Company's
subsidiaries, has a 20% interest in a joint venture with Ferguson Crossing
Pipeline Company, now Southwestern Gas Gathering, Inc. ("Southwestern") a
subsidiary of Mitchell Energycertain oil and Development Company, relating to an
intrastate pipeline. Pecos and its related facilities aregas properties
located in Leon and
Madison Counties, Texas. The pipeline and related facilities are referred to
as the "Pecos Pipeline Systems". Southwestern acts as the manager of the joint
venture and the net proceeds are distributed to the venturers on a monthly
basis, subject to the retention of one month of working capital.
In September, 1993, the same parties created another joint ventureTexas for the
purpose of separating the gas contract from the physical pipeline. The joint
venture participants are National Marketing Company, which is a subsidiary of$49,000.
During 1997, the Company sold its interests in certain oil and Mitchell Marketing Company. This joint venture is known as
"Madison Gas Marketing Services" ("Madison Gas").
The joint ventures were establishedgas
properties located primarily in Montana for $370,000. During 1996, the purposes of buying and/or
transportingCompany
sold its interests in certain oil and gas from producers and other pipelines under various contracts at
various receipt points and delivering or reselling the gas to Lone Star Gas
Company ("Lone Star") under the terms and conditions of a premium priced/fixed
volume 20-year contract dated October 1, 1981. On August 31, 1994, effective
November 1, 1994, Madison Gas entered into a settlement agreementproperties located substantially in
North Dakota for the
remaining term of the contract providing for (i) a total fixed contract
quantity of 23,826,560 Mmbtu, (ii) a monthly average daily contract quantity
not to exceed 18,000 Mmbtu during the months of November through March, (iii)
a monthly average daily contact quantity not to exceed 7,000 Mmbtu during the
months of April through October, (iv) an average annual gross profit margin of
$1.74 per Mmbtu less operating expenses and (v) six additional delivery
points. The Lone Star contract terminates at some time between May and
October, 2001 depending upon the monthly average daily contract quantities
taken under the settlement agreement.$326,000.
Investment in Marcum Natural Gas Services
TheOn January 5, 1999 the Company presently owns 675,200 sharessold its investment in National Gas Services
("Marcum") for $240,000. Marcum is a publicly held diversified provider of
products and services to the common stock of Marcum, or
approximately 5.8% of the Marcum common stock outstanding. The Company also
owned 1,260,000 Marcum common stock purchase warrants exercisable at a price
of $4.00 per share. The warrants expired on February 13, 1996.
8
natural gas industry.
Competition
The oil and gas industry is highly competitive. Major and independent oil
and gas companies, drilling and production acquisition programs and individual
producers and operators are active bidders for desirable oil and gas
properties, as well as the equipment and labor required to operate those
properties. Many competitors have financial resources substantially greater
than those of the Company, has, and staffs and facilities substantially larger than
those of the Company. The availability of a ready market for the oil and gas
production of the Company will depend in part on the cost and availability of
alternative fuels, the level of consumer demand, the extent of other
domestic
production of oil and gas, the extent of importation of foreign oil and gas,
the cost of and proximity to pipelines and other transportation facilities,
regulations by state and federal authorities and the cost of complying with
applicable environmental regulations.
9
Regulations
The availability of a ready market for any natural gas and oil production
depends upon numerous factors beyond the Company's control. These factors
include regulation of natural gas and oil production, federal and state
regulations governing environmental quality and pollution control, state
limits on allowable rates of production by a well or proration unit, the
amount of natural gas and oil available for sale, the availability of adequate
pipeline and other transportation and processing facilities and the marketing
of competitive fuels. For example, a productive natural gas well may be "shut-
in" because of an oversupply of natural gas or the lack of an available
natural gas pipeline in the areas in which the Company may conduct operations.
State and federal regulations generally are intended to prevent waste of
natural gas and oil, protect rights to produce natural gas and oil between
owners in a common reservoir, control the amount of natural gas and oil
produced by assigning allowable rates of production and control contamination
of the environment. Pipelines are subject to the jurisdiction of various
federal, state and local agencies as well.
Federal Regulation of Natural Gas
The Federal Energy Regulatory Commission ("FERC") regulates the
transportation and resale of natural gas in interstate commerce pursuant to
the Natural Gas Act of 1938 (the "NGA"). Since 1978, the Natural Gas Policy
Act of 1978 (the "NGPA") has regulated maximum selling prices of certain
categories of gas in either interstate or intrastate commerce. FERC also
administers the NGPA. Under the Natural Gas Wellhead Decontrol Act of 1989,
however, most regulation and control of natural gas have been eliminated. None
of the remaining areas of regulation under the NGA and NGPA have a direct
effect on the Company's operations. There can be no assurance, however, that
the Company's production of natural gas will not be subject to federal
regulation in the future.
In April 1992, subsequently as amended, FERC issued Order 636, a rule which
restructures the interstate natural gas transportation and marketing system to
ensure that direct sales of gas by producers or marketers receive pipeline
service comparable to pipeline gas sales. FERC Order 636 is intended to
provide "open access" to producers for transportation of gas on ten interstate
pipeline systems.
Environmental Regulation
Various federal, state and local laws and regulations covering the discharge
of materials into the environment, or otherwise relating to the protection of
the environment, may affect the Company's operations and costs as a result of
their effect on oil and gas development, exploration and production
operations. It is not anticipated that the Company will be required in the
near future to expend amounts that are material in relation to its total
capital expenditures program by reason of environmental laws and regulations
but, inasmuch as such laws and regulations are frequently changed by both
federal and state agencies, the Company is unable to predict the ultimate cost
of continued compliance. Additionally, see existing EPA matters discussed in
Item 3--Legal Proceedings.
9
State Regulation of Oil and Gas Production
State statutes and regulations require permits for drilling operations,
drilling bonds and reports concerning operations. In addition, there are state
statutes, rules and regulations governing conservation matters, including the
unitization or pooling of oil and gas properties, establishment of maximum
rates of production from oil and gas wells and the spacing, plugging and
abandonment of such wells. Such statutes and regulations may limit the rate at
which oil and gas could otherwise be produced from the Company's properties
and may restrict the number of wells that may be drilled on a particular lease
or in a particular field.
(There are currently discussions in several states
relating to the imposition of limitations on annual natural gas productions
rates.)
ITEMItem 3. LEGAL PROCEEDINGS.Legal Proceedings.
The U. S. Environmental Protection Agency ("EPA") has identified the Company
as a potentially responsible party ("PRP") for the cost of clean-up of
"hazardous substances" at an oil field waste disposal site in Vermilion
Parish, Louisiana. The EPA has estimatedCompany estimates that the totalremaining cost of long-term
clean-up of the site will be approximately $15.4$3.5 million, with the Company's
percentage of responsibility to be approximately 3.09%3.05%. As of December 31,
1995,1998, the Company has paid approximately $321,000 in costs related to this
matter and has $92,000 accrued approximately $400,000 for thisthe remaining liability. These costs have
not been discounted to their present value. The EPA and the PRPs will continue
to evaluate the site and revise estimates for the long-term clean-up of the
site. There can be no assurance that the cost of clean-up and the Company's
percentage responsibility will not be higher than currently estimated by the EPA.estimated. In
addition, under the federal environmental laws, the liability costs for the
clean-up of the site is joint and several among all PRPs. Therefore, the
ultimate cost of the cleanupclean-up to the Company could be significantly higher
than the amount presently estimated or accrued for this liability.
The Company is party to additional lawsuits arising out ofin the normal course of
business. However, theThe Company has defended and intends to continue to defend these actions vigorously and believes,
based on currently available information, that adverse results or judgments
from such actions, if any, in excess of insurance
coverage or amounts already provided, will not be material to theits financial position or
results of operationsoperations.
Item 4. Submission of the Company and its consolidated
subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.Matters to a Vote of Security Holders.
None.
10
PART II
ITEMItem 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's common stock is traded on the New York Stock Exchange.
At March 22, 1996,26, 1999 the number of holders of record of the Company's common
stock without determination of the number of individual participants in
security position was 3,8373,492 with 41,804,5105,247,705 shares outstanding. High and low
sales prices for the Company's common stock for each quarter during the
calendar years 19951998 and 19941997 are as follows:
1995 19941998 1997
---------- ---------
Quarter Ended High Low High Low
------------- --------
QUARTER ENDED HIGH LOW HIGH LOW
------------- ---- ----- ---- ------- ----
March 31............................................ N/A N/A N/A N/A31............................................. $8.00 5.06 9.00 6.00
June 30............................................. N/A N/A N/A N/A30.............................................. $7.19 5.25 9.00 6.00
September 30........................................ 1 3/8 15/16 N/A N/A30......................................... $5.63 2.25 6.50 5.00
December 31......................................... 1 1/4 3/4 N/A N/A31.......................................... $3.00 1.13 6.50 4.50
Prices from periods priorThe prices in the table above have been adjusted to give retroactive effect
to the business combination (August 15, 1995) are
not applicable due to La/Cal being a privately held partnership.Company's one-for-eight reverse stock split in March 1998.
The Company has not paid a cash dividend on its Common Stock and does not
intend to pay such a dividend in the foreseeable future.
ITEM11
Item 6. SELECTED FINANCIAL DATA.Selected Financial Data.
Selected Statement of Operations Data:
The following table sets forth selected financial data of the Company for
each of the years in the five-year period ended December 31, 1998, which
information has been derived from the Company's audited financial statements.
This information should be read in connection with and is qualified in its
entirety by the more detailed information in the Company's financial
statements under Item 8 below and Item 7, "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
PERIOD FROM PERIOD FROM
YEAR ENDED JULY 15, 1993 JANUARY 1, 1993 YEAR ENDED
DECEMBERYear Ended December 31,
THROUGH THROUGH DECEMBER 31,
---------------------- DECEMBER 31, JULY 14, --------------------------------------------------------------------------
1998 1997 1996 1995 1994
1993 1993(A) 1992(A) 1991(A)
----------- ---------- ------------- --------------- ------- ----------------- ---------- ----------
Revenues........................ $Revenues................ $10,591,873 12,901,361 9,769,383 6,174,412 5,013,446
1,068,404 947,000 896,000 244,000Depletion, Depreciation
and Amortization....... 4,094,447 4,862,754 3,788,292 1,785,502 1,156,624
Exploration............. 6,010,425 3,205,730 1,149,240 193,159 4,240
Interest Expense........ 1,909,849 1,416,675 828,394 1,132,488 1,072,098
Total Costs and
Expenses..............Expenses............... 18,311,421 14,978,629 9,476,366 5,037,101 2,998,628
574,220 137,000 173,000 55,000
Income Before Extraordinary
Item........................... 1,137,311 2,014,818 494,184Gain on sale of assets.. 4,206 688,304 88,428 -- --
Extraordinary Item--
Early Extinguishment of
Debt..Debt.................. -- -- -- 482,906 --
--
Net Income...................... $Income (Loss)....... (7,715,342) (1,388,964) 381,445 654,405 2,014,818
494,184
Selected Balance Sheet Data:Preferred Stock
Dividends.............. 1,255,638 1,205,210 644,800 254,932
Earnings (Loss)
Applicable to Common
Stock.................. (8,970,980) (2,594,174) (263,355) 399,473
Basic Loss Per Average
Common Share(c)........ (1.71) (.50) (.05)
Diluted Loss Per Average
Common Share(c)........ $ (1.71) (.50) (.05)
Average Common Shares
Outstanding(c)......... 5,243,105 5,229,307 5,225,564
Pro Forma Information:
Pro Forma Income
Taxes(a).............. 402,698 785,779
Pro Forma Net Income... 251,707 1,229,039
Pro Form Earnings
(Loss) Applicable to
Common Stock.......... (3,225) 1,229,039
Pro Forma Income Before
Extraordinary Item Per
Average Common
Share(c)............... .14 .50
Extraordinary Item Per
Average Common
Share(c)............... (.14) --
Pro Forma Basic and
Diluted Earnings (Loss)
Per Average Common
Share(c)............... -- .50
Pro Forma Average Common
Shares
Outstanding(b)(c)...... 3,465,318 2,470,653
DECEMBERDecember 31,
------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
1993
----------- ---------- ----------------------- ---------- ----------
Selected Balance Sheet
Data:
Total Assets.................... $22,382,716Assets........... $44,036,588 37,537,918 22,398,984 22,382,716 8,230,496
5,371,000
Long-Term Debt..................Total Long Term
Debt(e)............... 29,500,000 18,500,000 10,000,000 9,750,000 8,250,000
4,700,000
Stockholders' Equity
(Deficit)..(Partners' Deficit)... $ 4,959,388 14,332,676 9,135,200 9,662,812 (2,081,217) (989,000)
- - --------
(a) La/Cal Energy Partners was organized on July 15, 1993. StatementNo provision for income taxes is included in the consolidated statements
of operations data, other than revenues and costs and expenses for the yearsperiods ended December 31, 1992 and 1991 and for1994 or the period from
January 1, 19931995 through JulyAugust 14, 1993, is not presented as1995, for the properties for which such
revenuesoperations of La/Cal
Energy Partners (predecessor company), due to La/Cal Energy Partners being
a partnership and expenses relateincome taxes were not maintained as a separate business
unit and assets, liabilities or indirect operating costs applicablethe responsibility of the individual
partners of La/Cal Energy Partners. Certain unaudited pro forma
information relating to the properties were not segregatedCompany's results of operations, had La/Cal
Energy Partners been a corporation for those periods, is shown above.
(b) For purposes of this presentation the number of pro forma shares used for
periods prior to August 15, 1995, is 2,470,653 shares (adjusted
retroactively for the March 1998 reverse stock split), which is the number
of shares issued by the ownersCompany in exchange for La/Cal Energy Partners net
assets contributed.
(c) Number of shares restated to retroactively adjust for one for eight
reverse stock split in March 1998.
(d) The above data reflects the operations solely of La/Cal Energy Partners
for periods prior to August 15,1995, whereas such data reflects the
formationoperations of La/Cal. See "Management'sCal Energy Partners combined with Patrick Petroleum
Company for periods subsequent to August 15, 1995.
(e) Includes current maturities.
12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations".
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Background of Business Combination and Basis of PresentationOperations
1997 Acquisition
On August 15, 1995, the transactions contemplated by the Agreement and Plan
of Merger among Patrick Petroleum Company ("Patrick"), La/Cal Energy Partners
("La/Cal"), Goodrich Petroleum Corporation (the "Company"), and Goodrich
Acquisition, Inc. were completed. The Agreement provided for a combination of
Patrick and La/Cal, as a result of which the businesses previously conducted
by Patrick and La/Cal are now conducted byJanuary 31, 1997, the Company which is a Delaware
corporation formed foracquired the purpose of consummating such transactions, and its
subsidiaries. The combination of Patrick and La/Cal was effected primarily by
two concurrent transactions: (a) the contribution by La/Cal of all of its
assets and liabilities (excluding cash and accounts receivable accrued prior
to March 1, 1995, and interest thereon) to the Company in exchange for
19,765,226 shares of the Company's common stock (the "Common Stock") and (b)
the merger of Goodrich Acquisition with and into Patrick (the "Merger")
whereby (i) each outstanding share of Patrick common stock ("Patrick Common
Stock") was converted into one share of Common Stock; (ii) each outstanding
share of Patrick Series B Convertible Preferred Stock was converted into one
share of the Company's Series A Convertible Preferred Stock (except for 76,290
shares for which appraisal rights were preserved) and (iii) Patrick, the
surviving corporation in the Merger, became a wholly-owned subsidiary of the
Company. Effective January 31, 1996, the preferred shares under appraisal
rights were reinstated.
The combination transactions were accounted for as a purchase business
combination in accordance with Accounting Principles Board Opinion No. 16,
Business Combinations whereby La/Cal was deemed to be the acquiror and Patrick
the acquiree. Accordingly, on August 15, 1995, the Company recorded the assets
and liabilities of Patrick at fair value, whereas the assets and liabilities
of La/Cal are reflected at historical book value. The consolidated financial
statements reflect the operations solely of La/Cal for periods prior to August
15, 1995, whereas such financial statements reflect the operations of the
combined entities for periods subsequent to August 15, 1995. As a result,
comparison of the current and prior period financial statements presented are
significantly impacted by the combination transactions and, accordingly, are
not necessarily indicative of future operating results.
Prior to the combination transactions, La/Cal was a privately owned
Louisiana general partnership which was formed on July 15, 1993, by the
contribution of certain oil and gas properties owned by the partners.
Changes in Financial Condition (December 31, 1995 versus December 31, 1994)
As noted above, the balance sheet presented as of December 31, 1994 reflects
the assets and liabilities of La/Cal only whereas the balance sheet as of
December 31, 1995 reflects the assets and liabilities of the combined
entities. Variances in significant asset, liability and equity accounts are
addressed in the following paragraphs.
The December 31, 1995 balance sheet reflects the Company's investment in
marketable equity securities and investment in a pipeline joint venture which
were assets held by Patrick. Property and equipment reflects an increase of
approximately $9,000,000, substantially due to the addition of oil and gas properties of
Patrick which were recorded at their fair value on August 15,
1995,La/Cal Energy Partners II ("La/Cal II") and certain working interest owners
for a purchase price of $16.5 million ("La/Cal II Acquisition"). The purchase
price consisted of $1.5 million cash, the acquisition date. December 31, 1995 amounts for accounts receivableassumption of $7.5 million La/Cal II
long-term debt and prepaid expenses are the resultissuance of the activities750,000 shares of Series B convertible
preferred stock of the Company subsequent("Series B Preferred Stock") with an aggregate
liquidation value of $7.5 million. In connection with the La/Cal II
Acquisition, the Company increased its borrowing base to $22.5 million and
borrowed an additional $9 million to retire or (payoff) La/Cal II's debt and
to pay the business combination.cash portion of the purchase price. The reduction in deferred charges
primarily represents the charge for the early extinguishmentSeries B Preferred Stock
accrues dividends at a rate of La/Cal's debt
as more fully discussed below.
Included in the December 31, 1995 amount for accrued liabilities8.25% per annum and each share of Series B
Preferred Stock is $400,000
which is related to possible future amounts payable in the Company's role as a
potentially responsible party for the costconvertible into 1.12 shares of clean-up of "hazardous
substances" at an oil field waste disposal site. This liability was a Patrick
liability and was recordedcommon stock. Such shares
are redeemable by the Company as a part of the combination
transactions.
The Decemberafter January 31, 1995 balance sheet reflects $387,000 included accrued
liabilities and $573,000 in other liabilities representing the current and
long-term portions of the Company's obligation under consulting
12
agreements with Patrick's former chairman and his son, a former employee of
Patrick. Other changes in accrued expenses and accounts payable are the result
of activities of the Company subsequent to the business combination.
Long term debt as of December 31, 1995 represents the outstanding balance
under the Company's credit facility with a bank. The original amount drawn
under the facility immediately following the business combination was
$21,000,000 but was reduced by $10,000,000 in September, 1995 primarily due to
proceeds from the sale of the investment in the Penske Corporation (see Note G
to the consolidated financial statements). This debt was further reduced
during the fourth quarter of 1995 by $1,250,000 from proceeds from the sale of
certain properties located in Michigan, Montana and North Dakota. Debt
outstanding as of December 31, 1994 reflected amounts issued under La/Cal's
10% Senior Secured General Obligation Notes. This debt was paid off in
connection with the combination.
Due to La/Cal being a partnership and its recorded liabilities exceeding its
assets, the December 31, 1994 balance sheet reflects an amount for partners'
deficit of $2,081,217. The December 31, 1995 balance sheet reflects
stockholder equity accounts of the Company, a corporation. Convertible
preferred stock of Patrick was assumed as preferred stock of Goodrich and
recorded2001 at its par value of $1,098,710 in the business combination. This
amount was reduced by $363,851 as the result of the October 1995 conversion of
certain shares of preferred stock to common. Common stock reflects 39,530,452
shares issued in the business combination transactions at $.20$10.00 per share par
value plus 2,274,058 shares as a result of the preferred stock conversion. The
December 31, 1995, additional paid in capital balance is the result of the
effects of the combination transactions, primarily the elimination of
partners' deficit of La/Cal, issuance of the Company's common and preferred
stock, and the recording of Patrick's assets and liabilities at fair value.
Accumulated deficit at December 31, 1995 reflects only the operations less
preferred stock dividends of the Company since August 15, 1995, the date of
the combination transactions.share.
Results of Operations
As noted above, the consolidated statements of operations for the year ended
December 31, 1994 and the period from July 15, 1993 through December 31, 1993
reflect the operations of La/Cal only, whereas the statement of operations for
the year ended December 31, 1995 reflect the operations solely of La/Cal prior
to the combination date (August 15, 1995) and the operations of the combined
entities subsequent to the combination date. The consolidated statement of
operations for the period from July 15, 1993 through December 31, 1993
reflects the income information for La/Cal for 1993 subsequent to its
formation on July 15,1993. The statement of revenues and direct operating
expenses of "Properties Contributed to La/Cal Energy Partners" presents the
revenues and direct operating expenses of the properties contributed to La/Cal
prior to its formation.
Year ended December 31, 19951998 versus year ended December 31, 1994--Revenues1997--Total
revenues in 19951998 amounted to $6,174,000$10,592,000 and were $1,161,000 (23%$2,309,000 (18%) higherlower than
1994total revenues in 1997 due to the inclusion of the combined entities subsequent to August 15, 1995, which
produced higherlower oil and gas sales. This was primarily due to higher volumesrevenues and the loss of
oil production for the period slightly offset by lower gas production and
prices (see volume and price table below). Additionally, 1995 includes the
revenues from the pipeline joint venture. Oil and gas sales were $1,515,000
lower due primarily to lower oil and gas prices, partially offset by higher
production volumes. Revenues from the pipeline joint venture which was acquired from Patrick and
contributed $573,000were $-0- in 1998
compared to $1,078,000 in 1997 due to the sale of the asset in the period.fourth
quarter of 1997.
The following table reflects the production volumes and pricing information
for the periods presented:
1995 19941998 1997
------------------------ ------------------------
PRODUCTION AVERAGE PRICE PRODUCTION AVERAGE PRICEProduction Average Price Production Average Price
---------- ------------- ---------- -------------
Gas (MCF)(Mcf)............... 2,213,9232,782,825 $ 1.72 2,386,1302.18 2,449,320 $ 1.852.55
Oil (BBLS)(Bbls).............. 102,731 $16.27 36,487 $15.99316,768 $11.88 282,380 $18.06
Lease operating expense and production taxes were $345,000$2,822,000 for 1998
compared to $2,316,000 for 1997, or 50%$506,000 higher, due primarily to the
Company not incurring, in the 1997 period, ad valorem taxes related to the
La/Cal II properties which were the responsibility of the La/Cal II partners.
Additionally, the 1998 period includes eight additional producing wells and
twelve months of lease operating expense and production taxes for the La/Cal
II properties, compared to eleven months for 1997 due to the higher production volumes and depletion,effective date of
the acquisition being January 31, 1997. Depletion, depreciation and
amortization was $603,000$4,094,000 in 1998 versus $4,863,000 in 1997, or 52% higher than 1994$769,000
lower, substantially due to the addition of the Patrick
properties subsequent to August 15, 1995, including theno amortization of the pipeline joint venture.
13
venture in
1998 compared to $741,000 in 1997.
The Company incurred $6,010,000 of exploration expense in 1998 compared to
$3,206,000 in 1997. Included in the 1998 exploration expense is $3,684,000 of
costs related to dry holes during the period versus $2,342,000 of such costs
in 1997.
The Company recorded an impairment fromin the adoptionrecorded value of Financial Accounting
Standards Board Statement No. 121, Accounting for the Impairment of Long-Lived
Assetscertain oil and
for Long-Lived Assets to Be Disposed Ofgas properties in the fourth quarter of 19951998 in the amount of $157,000. Additionally, the Company incurred $193,000 of
exploration expense in 1995, whereas the 1994 amount was only $4,000$1,076,000 due
to La/Cal having virtually no exploration activities.
The large variance ($658,000)lower oil prices and higher than expected depletion rates. This compares to
an impairment of $550,000 recorded in general and administrative expenses is due
to the fact that La/Cal was provided substantially all of its general and
administrative expenses at no cost by an affiliate whereas the Company
provides its own general and administrative services. Additionally, assame period a public company, the Company incurs a higher level of general and
administrative expenses than as a privately held company. However, based on
the Company's current and anticipated future level of operations on a combined
basis, such expenses were, and are anticipated to be less than the combined
historical general and administrative expenses of La/Cal and Patrick.year ago.
Interest expense was $60,000 (6%) higher$1,910,000 in 19951998 compared to $1,417,000 (35% higher)
due to the Company (from
August 15, 1995 through December 31, 1995) and La/Cal (from January 1, 1995
through August 14, 1995) having slightly higher average debt outstanding, in
1995 than La/Cal in 1994. A partial offsetting factor to this was the
Company'sslightly offset by
a lower effective interest rate from August 15, 1995in 1998 compared to 1997.
General and administrative expenses amounted to $2,399,000 for 1998 versus
$2,628,000 in 1997.
13
The Company's preferred stock dividends amounted to $1,256,000 for 1998
compared to $1,205,000 in 1997 or $51,000 higher due to twelve months of
dividends being paid on the Company's Series B Preferred Stock in the current
year versus eleven months in the prior year.
Year ended December 31, 1995.
The statements of operations reflect no income taxes due to: 1) the
individual partners of La/Cal being responsible for such taxes for the periods
containing the operations of La/Cal only and 2) the Company incurring a loss
for the period from August 15, 1995, through1997 versus year ended December 31, 1995,1996--Total
revenues in 1997 increased to $12,901,000 and were $3,132,000 (32%) higher
than total revenues in 1996 due to increased oil and gas revenues, offset by
lower revenues from the pipeline joint venture. Oil and gas sales were
$3,664,000 higher due substantially to increased revenues as a result of the
extraordinary item.
In connectionLa/Cal II acquisition (effective January 31, 1997) along with increased gas
volumes on the combination transactions,pre-acquisition properties, offset somewhat by lower oil and
gas prices. Revenues from the Company paid off
La/Cal's General Obligation Notes and the related unamortized debt financing
costs of $482,906pipeline joint venture were charged to operations as an extraordinary item$459,000 lower in
the
third quarter of 1995.
The Company assumed Patrick's Convertible Preferred Stock and has incurred
related dividends of $255,000 from August 15, 1995 to December 31, 1995.
Year ended December 31, 1994 versus year ended December 31, 1993--For
purposes of this discussion, references to La/Cal's 1993 operations include
the sum of the operations of the properties contributed prior to La/Cal's
formation and its operations subsequent to its formation. Revenues were
$5,013,000 in 1994 and were $2,998,000 (149%) higher than 1993. This was1997 due to the highersale of the asset in the fourth quarter of 1997.
The following table reflects the production volumes of production (see table below) resulting from
significant well development and acquisition of producing properties by La/Cal
in December, 1993 and February, 1994, offset by somewhat lower prices.pricing information
for the periods presented:
1994 19931997 1996
------------------------ ------------------------
PRODUCTION AVERAGE PRICE PRODUCTION AVERAGE PRICEProduction Average Price Production Average Price
---------- ------------- ---------- -------------
Gas (MCF)(Mcf)............... 2,386,1302,449,320 $ 1.85 933,4352.55 1,623,377 $ 2.022.60
Oil (BBLS)(Bbls).............. 36,487 $15.99 7,319 $16.65282,380 $18.06 165,964 $20.88
Lease operating expensesexpense and production taxes increased to $684,000 in 1994were $2,316,000 for 1997
compared to $331,000 in 1993. This increase is largely$1,615,000 for 1996 or $701,000 higher due primarily to the
resultaddition of increased
production and the acquisition of producing properties and development
activity in the Pecan Lake and Lake Charles fields. Depreciation, depletionLa/Cal II properties. Depletion, depreciation and amortization
expense was substantially$4,863,000 versus $3,788,000 for 1996 or $1,075,000 higher for the year 1994 compared
to the period from July 15, 1993 through December 31, 1993 due to the
significant increaseaddition of the La/Cal II properties, offset by approximately $300,000 less
amortization of the pipeline joint venture. Included in capitalizeddepletion,
depreciation and amortization is depletion of oil and gas properties of
$4,066,000 and $2,684,000, respectively.
The Company incurred $3,206,000 of exploration expense in 1997 compared to
$1,149,000 in 1996. Included in the 1997 exploration expense is $2,342,000 of
costs related to dry holes during the period versus $542,000 of such costs in
1996.
The Company recorded impairments in the recorded value of certain oil and
production volumes.gas properties in 1997 in the amount of $550,000.
Interest expense was $1,417,000 in 1997 compared to $828,000 due to
borrowings by the Company of $1,072,000$9,000,000 on January 31, 1997 in 1994 was significantlyconnection with
the La/Cal II Acquisition, resulting in higher average debt outstanding than the
$199,000 incurred
for the period from July 15, 1993 throughprior year.
General and administrative expenses amounted to $2,628,000 for 1997 versus
$2,096,000 in 1996 due largely to expenses associated with the addition of six
employees in 1997.
The Company recorded a gain on the sale of its interest in the pipeline
joint venture of $688,000 in 1997.
The Company's preferred stock dividends amounted to $1,205,000 for the
twelve months ended December 31, 19931997 compared to $645,000 for 1996. The
increase was due to dividends paid on the financing of substantially all property acquisitions and
development activityCompany's Series B Convertible
Preferred Stock issued on January 31, 1997 in connection with advances underthe La/Cal's loan agreement with an
institutional lender. Such acquisitions and development activity took place in
late 1993 and throughout 1994.
14
Cal II
Acquisition.
Liquidity and Capital Resources
Net cash provided by operating activities was $3,579,000$4,517,000 in 19951998 compared to
$2,823,000$6,633,000 in 19941997 and $479,000 from July 15, 1993, through December 31, 1993.$4,292,000 in 1996. The Company's accompanying
consolidated statements of cash flows identify major differences between net
income (loss) and net cash provided by operating activities for each of the
periodsyears presented.
Net cash providedused by investing activities amounted to $8,877,000$14,959,000 in 19951998
compared to net cash used of $3,720,000$6,007,000 in 19941997 and $1,968,000 from July 15,
1993, through December 31, 1993.$4,082,000 in 1996. The year ended December
31, 1995, reflects
the receipt by the Company1998 is composed almost entirely of $9,600,000 cash in September from the sale of
the investment in the Penske Corporation as well as $1,514,000 from the sale
of certain properties in Michigan, Montanapaid for
14
exploration and North Dakota in the fourth
quarter. This was offset by the payment by the Company of $1,088,000 in
connection with the business combination and $650,000 for capital
expenditures. The 1994 and 1993 periods reflect $3,720,000 and $1,968,000 indrilling capital expenditures respectively due to extensive drilling and completion
activities and acquisition of producing properties by La/Cal during those
periods.
Net cash used by financing activities in 1995 total $12,553,000 compared to
net cash provided by financing activities of $856,000 in 1994 and $2,241,000
from July 15, 1993, through December 31, 1993. The 1995 amount included the
borrowing of $21,000,000 by the Company which was used primarily to pay off
the La/Cal debt ($9,151,000) and the debt assumed from Patrick ($10,626,000).
The remainder of the loan proceeds were used to provide working capital and
pay accrued interest.$14,879,000. The year ended
December 31, 1995 also1997 reflects debt
paydowns as follows: 1) $915,000non-acquisition capital expenditures of $9,157,000
and of cash paid in connection with the purchase of oil and gas properties of
$2,075,000. These amounts were offset by La/Cal on its General Obligation Notes
prior to August 15, 1995; 2) $9,500,000 byproceeds from sale of the Company on its credit facility
in September from the Penske sale proceeds; 3) $500,000 by the Company on its
credit facility from operations/working capital 4) $1,250,000 by the CompanyCompany's
interest in the fourth quarter from thepipeline joint venture ($3,564,000) and sale of certain oil
and gas properties.properties located in Montana. The 1995year ended December 31, 1996 amount
is substantially comprised of $3,911,000 in capital expenditures.
Net cash provided by financing activities was $9,744,000 in 1998 compared to
net cash used in financing activities of $177,000 in 1997 and $479,000 in
1996. The 1998 amount includes the borrowing of $11,500,000 by the Company
under its line of credit offset by paydowns during the year of $500,000.
Preferred stock dividends in 1998 amounted to $1,256,000 (Series A and Series
B). The 1997 amount includes the borrowing of $9,000,000 by the Company under
its line of credit which was used to pay off the debt assumed in the La/Cal II
Acquisition and to pay the cash portion of the purchase price. The 1997 amount
also includes partnership distributionsother borrowings of $3,000,000 against its line of credit offset
by La/Calpaydowns during the year of $1,133,000
prior to August 15, 1995$3,500,000 and the payoff of La/Cal II debt of
$7,464,000. Preferred stock dividends in 1997 amounted to $1,205,000 (Series A
and Series B). The 1996 amount primarily consists of the borrowing of
$1,800,000 against the Company's line of credit partially offset by debt
paydowns of $1,550,000 and the payment of preferred stock dividends subsequent toof
$645,000 (Series A only).
At December 31, 1998, the business combinationCompany was not in the amountcompliance with a restrictive
covenant of $363,000. The 1994 and
1993 amounts consist of La/Cal borrowings used to partially fund the
significant capital expenditures mentioned above. This was offset by
partnership distributions of $3,107,000 and $4,073,000, respectively.
Additionally, the amounts include subsequent payments of $1,757,000 and
$407,000 on the borrowings.
The Company has aits existing credit facility and, accordingly, the entire
principal amount outstanding is presented in current maturities of long-term
debt. The amount outstanding under the credit facility as of December 31, 1998
was $29,500,000. On March 29, 1999 the Company signed a preliminary agreement
with a bank whichCompass Bank to restructure its existing credit facility. The preliminary
credit agreement will allow the Company to be in compliance with all covenants
upon execution of the agreement. The preliminary agreement provides for a
total
borrowing base determined by the bank every six monthsfacility of $20,500,000 with monthly reductions of $50,000 on
April 1, 1999 and May 1, 1999, $200,000 on June 1, 1999 and $300,000 on July
1, 1999 and each month thereafter. Semi-annual borrowing base determinations
will be made beginning July 1, 1999 based in part based on the Company's oil and gas
reserve information. Any and allThe maturity date for amounts drawn are due
and payable on Juneunder the Borrowing
Base facility is February 1, 1997.2001. Interest on related borrowingssuch facility is based on either
of two methods at the option of the Company: the bank's prime lending rate or
LIBOR
plus 2%. Interest and rates are set on specific draws for one, two, three or six month
periods also at the option of the Company.
The original borrowing base of $22,000,000 was reduced to $15,000,000 after
the sale of the Company's investment in the Penske Corporation (see Note G to
the consolidated financial statements), in accordance with the specific
provisions of the credit facility. The amount drawn by the Company as of
December 31, 1995 was $9,750,000.
The Company plans to incur capital expenditurespreliminary agreement also establishes a Tranche A facility in the
amount of approximately $7,000,000 in calendar 1996.$9,000,000. The Company plans to finance such
expenditures from operatingmaturity date for the Tranche A facility is December
1, 1999. The Tranche A requires that excess cash flow from operations, as
defined in the preliminary agreement, be applied to outstanding principal and
drawsinterest until the maturity date, with interest based on the Compass Bank
Index Rate plus 2%.
The preliminary agreement requires the net proceeds of asset sales be used
to extinguish outstanding principal and interest under the borrowing base
facility and Tranche A. Additionally, under the terms of the preliminary
agreement, the Company may not make any distributions or pay dividends,
including dividends on any class of its bank credit facility.preferred stock, until Tranche A is
paid in full.
Additionally, budgeted capital expenditures are required to be approved by
the Lender prior to closing, and such approval shall be effective for a period
of six months or until such time as an increase is requested. Furthermore,
provided actual capital expenditures do not exceed the approved budgeted
amount, the determination of capital expenditures is at the sole discretion of
the Company. The preliminary agreement also requires that the Company's vendor
accounts payable balance shall not exceed $2,500,000 as of June 30, 1999. The
Company's business strategyvendor accounts payable balance was $3,721,000 at December 31, 1998.
The preliminary agreement is subject to exploredefinitive documentation and develop drilling prospects
alongLender
credit approval.
The terms of the Gulf CoastCompany's Series A Preferred Stock provide that the Company
will not incur additional debt after such time as it reports financial results
which show the Company's stockholders' equity to be less than the liquidation
preference of the Series A Preferred Stock. As of December 31, 1998, the
Company's stockholders' equity was approximately $4.9 million and in West Texasthe
liquidation preference on the outstanding shares of the Series A Preferred
Stock was approximately $7.9 million. As a result, the Company is unable to
incur additional debt under its credit facility or from other sources at the
present time.
15
Due to the Company's existing current working capital deficiency, required
pay downs under its credit facility and pursue strategic acquisitionsthe restrictions imposed by the Series
A Preferred Stock, management is exploring a number of alternatives that are
directed toward making the Company profitable and improving its liquidity. The
principal strategies include:
1) raising additional capital through the issuance of equity securities,
or a combination of equity and subordinated debt;
2) acquisition of value enhancing oil and gas properties that offer
additional development opportunities and increased cash flow;
3) mergers and/or acquisitions by other entities;
4) reducing operating costs;
5) sale of certain oil and gas properties;
6) renegotiation or amendment of the Company's credit facility and
capital structure
As with any plan of this nature, its ultimate realization will depend upon
the cooperation of creditors, potential investors and others. As a result, the
outcome of the plan cannot presently be determined and no adjustments related
to the specific considerations of management's plan have been made in the
accompanying consolidated financial statements. Should the plan not be
completed, the Company may not be able to liquidate liabilities as they come
due. In addition, the Company's current liquidity situation and its agreement
with Compass Bank have resulted in a suspension of new drilling opportunities. Itexpenditures
until such time as certain aforementioned principle strategies have been
effected.
Quarterly Cash Dividends
The Company announced on March 23, 1999 that it has suspended payment of its
regular quarterly cash dividend on both classes of its Preferred Stock. This
measure was taken to conserve cash for corporate and operating purposes and
was precipitated by the recent drop in commodity prices. The Company has no
plans to reinstate the cash dividends in the foreseeable future.
Year 2000
The Company is anticipated that such acquisitions wouldin the process of assessing the ability of its various
electronic operating systems, and those of significant third parties, to
appropriately consider periods and dates after December 31, 1999. The
Company's senior financial management has taken responsibility for
identifying, addressing and monitoring its Year 2000 issues. These individuals
report to the Audit Committee of the Board of Directors on a periodic basis.
For Company systems identified as not being Year 2000 compliant, the Company
has developed plans to correct these systems and expects to be financedcompliant on
the systems by the second quarter of 1999.
As for third parties with bank or other institutional borrowings.
Newly Issued Accounting Pronouncements
During 1995,which the Financial Accounting Standards Board issued StatementCompany has a material relationship, the
Company is in various stages of Financial Accounting Standard No. 121, Accounting fordiscussions and conclusions related to the
Impairmentability of Long-
Lived Assetsthose third parties to become compliant and for Long-Lived Assets to Be Disposed Of.
15
Under SFAS No. 121, an impairment is determined to have occurred and a loss is
recognized when the net of future cash inflowsrelated timing
thereof.
The estimated costs associated with becoming Year 2000 compliant are not
expected to be generatedmaterial to the Company.
The Company has begun, but not yet completed, a comprehensive analysis of
the operational problems and costs (including loss of revenues) that would be
reasonably likely to result from the failure by the Company and certain third
parties to complete efforts necessary to achieve Year 2000 compliance timely.
A contingency plan has not been developed for dealing with the most reasonably
likely worst case scenario, and such scenario has not yet been clearly
identified. The Company currently plans to complete such analysis and
contingency planning by the second quarter of 1999.
The failure to correct a material Year 2000 problem could result in an
identifiable long-lived assetinterruption in, or failure of, certain normal business activities or
operations. Such failures could materially and cash outflowsadversely affect the Company's
16
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of
Year 2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Company's Year 2000 efforts
are expected to be required to
obtain those cash inflows is less thansignificantly reduce the carrying valueCompany's level of uncertainty about
the Year 2000 problem. The Company believes that, with the implementation of
new business systems and completion of the asset.various above-mentioned tasks as
scheduled, the possibility of interruptions to normal operations should be
significantly reduced.
Stock Listing
The Company performswas notified by the New York Stock Exchange that it is not in
compliance with certain of the Exchange's minimum financial criteria for
listed companies. The Company submitted a three-year business plan to the
Exchange in response to the notice. The Exchange accepted the Company's
business plan and will monitor its compliance with the plan on a quarterly
basis. As described above, the Company's liquidity situation may make it
difficult for the Company to adhere to this comparison forbusiness plan. If the Company
fails to do so, there can be no assurance that the New York Stock Exchange
will not delist the Company common stock.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Debt and debt-related derivatives
The Company is exposed to interest rate risk on its short-term and long-term
debt with variable interest rates ($29.5 million at December 31, 1998). Based
on the overall interest rate exposure on variable rate debt at December 31,
1998 a hypothetical 2% change in the interest rates would not materially
affect the Company's financial position, net income or liquidity.
Disclosure Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All statements other than statements of
historical facts included in this Annual Report on Form 10-K regarding reserve
estimates, planned capital expenditures, future oil and gas properties on a field-by-
field basis. Theproduction and
prices, future drilling activity, the Company's financial position, the
ability to become year 2000 compliant, business strategy and other plans and
objectives for future operations, are forward-looking statements. Although the
Company adopted this accounting standard duringbelieves that the fourth
quarterexpectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations
will prove to be correct. There are numerous uncertainties inherent in
estimating quantities of 1995proved oil and recorded an impairment amounting to $157,000.
During 1995,natural gas reserves and in projecting
future rates of production and timing of development expenditures, including
many factors beyond the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 123, Accounting for Stock Based
Compensation. This statement encourages companies to recognize compensation
expense for certain equity instrument issuances in accordance with new fair
value accounting guidelines. The Company has decided not to adopt the
recognition provisionscontrol of the StatementCompany. Reserve engineering is a
subjective process of estimating underground accumulations of oil and will adoptnatural
gas that cannot be measured in an exact way, and the disclosure
provisionsaccuracy of any reserve
estimate is a function of the Statementquality of available data and of engineering and
geological interpretation and judgment. As a result, estimates made by
different engineers often vary from one another. In addition, results of
drilling, testing and production subsequent to the date of an estimate may
justify revisions of such estimate and such revisions, if significant, would
change the schedule of any further production and development drilling.
Accordingly, reserve estimates are generally different from the quantities of
oil and natural gas that are ultimately recovered. Additional important
factors that could cause actual results to differ materially from the
Company's expectations include changes in 1996.
16oil and gas prices, changes in
regulatory or environmental policies, production difficulties, transportation
difficulties and future drilling results. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by such factors.
17
ITEMItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAFinancial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Goodrich Petroleum Corporation:
We have audited the accompanying consolidated balance sheets of Goodrich
Petroleum Corporation and Subsidiaries as of December 31, 19951998 and 1994,1997, and
the related consolidated statements of operations, stockholders' equity,
comprehensive income and cash flows for each of the years in the three year
period ended December 31, 1995 and 1994, and the period from
July 15, 1993 (inception) through December 31, 1993.1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Goodrich
Petroleum Corporation and Subsidiaries as of December 31, 19951998 and 1994,1997, and
the results of their operations and their cash flows for each of the years in
the three year period ended December 31, 1995 and 1994, and the period from July 15, 1993 (inception)
through December 31, 1993,1998, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note Dnote C
to the consolidated financial statements, in 1995,working capital deficiencies,
required payments under the Company adoptedcredit facility and restrictions imposed
by the provisionsCompany's Series A Preferred Stock raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are discussed in note C. The consolidated financial
statements do not include any adjustments that might result from the outcome
of Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of.this uncertainty.
KPMG PEAT MARWICK LLP
Shreveport, Louisiana
March 26, 1996
1729, 1999
18
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBERDecember 31, DECEMBERDecember 31,
1998 1997
ASSETS 1995 1994
------ ------------ ------------
CURRENT ASSETS
Cash and cash equivalents..........................equivalents.............................. $ 613,45095,630 $ 710,762793,358
Marketable equity securities....................... 759,600 --securities........................... 358,700 844,000
Accounts receivable
Trade and other, net of allowance................ 170,593 --allowance.................... 2,197,179 1,354,776
Accrued oil and gas revenue...................... 1,545,501 934,910revenue.......................... 1,089,226 1,641,969
Prepaid insurance.................................. 302,113insurance...................................... 184,898 174,201
Other.................................................. -- Other.............................................. 33,532 --
-----------4,000
------------ -----------
Total current assets........................... $ 3,424,789 1,645,672
-----------assets................................. 3,925,633 4,812,304
------------ -----------
PROPERTY AND EQUIPMENT
Oil and gas properties............................. 16,262,033 7,271,549properties................................. 53,320,832 41,154,687
Furniture, fixtures and equipment.................. 101,333 --equipment...................... 195,279 180,966
------------ -----------
-----------
16,363,366 7,271,54953,516,111 41,335,653
Less accumulated depletion, depreciation and
amortization...................................... (2,217,425) (1,309,866)amortization.......................................... (13,720,009) (8,869,783)
------------ -----------
-----------
TotalNet property and equipment..................... 14,145,941 5,961,683
-----------equipment........................... 39,796,102 32,465,870
------------ -----------
OTHER ASSETS
Investment in pipeline joint venture, net.......... 4,676,500 --
Deferred charges................................... 135,486 623,141
----------- -----------
4,811,986 623,141
----------- -----------ASSETS............................................. 314,853 259,744
TOTAL ASSETS................................... $22,382,716ASSETS......................................... $ 8,230,49644,036,588 $37,537,918
============ ===========
===========
See notes to consolidated financial statements.
18
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------ ------------ ------------
CURRENT LIABILITIES
Current portion of long term debt...................... $29,500,000 -- $ 1,816,723
Accounts payable....................................... 656,886 135,9167,763,507 1,996,887
Accrued liabilities.................................... 1,740,028 109,0741,813,693 2,708,355
------------ -----------
Total current liabilities............................ 2,396,914 2,061,71339,077,200 4,705,242
------------ -----------
LONG TERM DEBT........................................... 9,750,000 8,250,000
OTHER LIABILITIES........................................ 572,990 -- 18,500,000
STOCKHOLDERS' EQUITY
(DEFICIT)
Partners' capital (deficit)............................ -- (2,081,217)
Preferred stock; authorized 10,000,000 shares:
Series A convertible preferred stock, par value $1.00
per share; authorized
10,000,000 shares; issued 734,859 at December 31, 1995and outstanding 796,318 shares
(liquidating preference $10 per share, aggregating to
$7,348,590)........................................... 734,859 --$7,963,180).......................................... 796,318 796,318
Series B convertible preferred stock, par value $1.00
per share; issued and outstanding 750,000 shares
(liquidation preference $10 per share, aggregating to
$7,500,000).......................................... 750,000 750,000
Common stock, par value--$0.20value $0.20 per share; authorized
100,000,00025,000,000 shares; issued and outstanding 41,804,510
at December 31, 1995.................................. 8,360,902 --5,247,703
and 5,232,403 shares.................................. 1,049,541 1,046,481
Additional paid-in capital............................... 1,200,140 --capital............................. 15,226,027 15,146,095
Accumulated deficit...................................... (633,089) --deficit.................................... (12,461,598) (3,490,618)
Accumulated other comprehensive income................. (400,900) 84,400
------------ -----------
Total stockholders' equity (deficit)................. 9,662,812 (2,081,217)equity........................... 4,959,388 14,332,676
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $ 22,382,716 $ 8,230,49644,036,588 $37,537,918
============ ===========
See notes to consolidated financial statements.
19
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD FROM
JULY 15, 1993
YEAR ENDED (INCEPTION)
DECEMBERYear Ended December 31,
THROUGH
---------------------- DECEMBER 31,
1995 1994 1993-----------------------------------
1998 1997 1996
------------ ---------- ---------- ----------------------
REVENUES
Oil and gas sales....................... $5,477,208 4,995,663 1,059,882$ 9,836,863 11,351,586 7,687,748
Pipeline joint venture.................. 573,393 -- --
Other, net.............................. 123,811 17,783 8,5221,078,397 1,537,806
Other................................... 755,010 471,378 543,829
------------ ---------- ---------- -------------------
Total revenues........................ 6,174,412 5,013,446 1,068,40410,591,873 12,901,361 9,769,383
------------ ---------- ---------- -------------------
COSTS AND EXPENSES
Lease operating expense and production
taxes.................................. 1,029,501 684,131 194,0542,821,515 2,316,006 1,614,584
Depletion, depreciation and
amortization........................... 1,785,502 1,156,624 179,4764,094,447 4,862,754 3,788,292
Exploration............................. 193,159 4,240 --6,010,425 3,205,730 1,149,240
Impairment of oil and gas properties.... 157,000 --1,075,853 549,792 --
Interest expense........................ 1,132,488 1,072,098 199,3891,909,849 1,416,675 828,394
General and administrative.............. 739,451 81,535 1,3012,399,332 2,627,672 2,095,856
------------ ---------- ---------- -------------------
Total costs and expenses.............. 5,037,101 2,998,628 574,22018,311,421 14,978,629 9,476,366
------------ ---------- ---------
GAIN ON SALES OF ASSETS................... 4,206 688,304 88,428
------------ ---------- -------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM
AND INCOME TAXES......................... 1,137,311 2,014,818 494,184
========== ==========TAXES......... (7,715,342) (1,388,964) 381,445
Income Taxes............................ -- -- --
------------ ---------- ---------
NET INCOME BEFORE EXTRAORDINARY ITEM.......... 1,137,311
Extraordinary item--early extinguishment
of debt................................ (482,906)
----------
NET INCOME................................ 654,405(LOSS)......................... (7,715,342) (1,388,964) 381,445
Preferred stock dividends............... 254,9321,255,638 1,205,210 644,800
------------ ---------- EARNINGS AVAILABLE---------
LOSS APPLICABLE TO COMMON STOCK........STOCK........... $ 399,473(8,970,980) (2,594,174) (263,355)
============ ========== PRO FORMA INFORMATION (UNAUDITED):
Income before extraordinary item and
income taxes............................. $1,137,311 2,014,818 494,184
Pro forma income taxes*................... 402,698 785,779 192,732
---------- ---------- ----------
734,613 1,229,039 301,452
Extraordinary item--early extinguishment
of debt................................ (482,906) -- --
---------- ---------- ----------
Pro forma net income...................... 251,707 1,229,039 301,452
Preferred stock dividends............... 254,932 -- --
---------- ---------- ----------
Pro forma earnings available to common
stock....................................=========
BASIC LOSS PER AVERAGE COMMON SHARE....... $ (3,225) 1,229,039 301,452(1.71) (.50) (.05)
============ ========== =========
DILUTED LOSS PER AVERAGE COMMON SHARE..... $ (1.71) (.50) (.05)
============ ========== ==========
Pro forma income before extraordinary item
per average common share................. $ .02 .06 .02
Pro forma extraordinary item per average
common share............................. (.02) -- --
---------- ---------- ----------
Pro forma earnings per average common
share.................................... $ -- .06 .02
========== ========== ==========
Pro forma weighted average common shares
outstanding**............................ 27,722,543 19,765,226 19,765,226
========== ========== ===================
AVERAGE COMMON SHARES OUTSTANDING......... 5,243,105 5,229,307 5,225,564
- --------
* As described in Note D, no provision for income taxes is included in the
consolidated statements of operations for the periods ended December 31,
1994 and 1993, for the operations of La/Cal Energy Partners (predecessor
company), due to La/Cal being a partnership and income taxes were the
responsibility of the individual partners of La/Cal. Certain unaudited pro
forma information relating to the Company's results of operations had
La/Cal been a corporation, is shown here.
** For purposes of this presentation the number of pro forma shares used for
periods prior to August 15, 1995, is 19,765,226 shares, the number issued
by the Company in exchange for La/Cal's net assets contributed.
See notes to consolidated financial statements.
20
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIOD FROM
JULY 15, 1993
YEAR ENDED DECEMBERYear Ended December 31,
(INCEPTION) THROUGH
------------------------- DECEMBER 31,
1995 1994 1993
------------------------------------------------
1998 1997 1996
----------- ------------------------------ ----------
OPERATING ACTIVITIES
Net income.................... $ 654,405 2,014,818 494,184income (loss)....................... $(7,715,342) (1,388,964) 381,445
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depletion, depreciation and
amortization............... 1,785,502 1,156,624 179,476amortization.......................... 4,094,447 4,862,754 3,788,292
Amortization of leasehold costs........ 1,016,649 288,037 195,027
Amortization of deferred debt financing
costs....... 101,531 112,530 29,598
Extraordinary item--early
extinguishmentcosts................................. -- 27,694 72,329
Gain on sale of debt..... 482,906 -- --
Exploration costsassets................. (4,206) (688,304) (88,428)
Capital expenditures charged to
income..................... 193,159 4,240 --income................................ 4,382,514 2,341,954 678,213
Impairment of oil and gas properties................. 157,000 --properties... 1,075,853 549,792 --
Payment of other liabilities................ (130,010) -- --
(Increase) decrease in:liabilities........... (107,625) (321,040) (364,100)
Other.................................. (160,518) (87,357) (11,714)
----------- ----------- ----------
2,581,772 5,584,566 4,651,064
Net change in (exclusive of
acquisition):
Accounts receivable....... (28,773) (454,610) (480,300)receivable................... (289,660) 520,391 (1,042,630)
Prepaid insurance and other.................... (322,900) -- --
(Decrease) increase inother........... (71,550) 73,933 95,179
Accounts payable.......... 493,343 (72,846) 208,762payable...................... 2,975,821 (157,334) 370,418
Accrued liabilities....... 188,905 61,831 47,243
Other....................... 3,857 -- --
------------liabilities................... (679,620) 611,069 218,045
----------- ----------- ----------
Net cash provided by operating
activities... 3,578,925 2,822,587 478,963
------------activities.......................... 4,516,763 6,632,625 4,292,076
----------- ----------- ----------
INVESTING ACTIVITIES
SaleProceeds from sale of investment............ 9,600,000pipeline joint
venture................................ -- 3,564,000 --
Proceeds from sales of oil and gas
properties............... 1,514,336properties............................. 49,091 370,000 325,628
Acquisition of oil and gas properties... (129,325) (2,074,866) (234,378)
Capital expenditures.................... (14,878,619) (7,866,173) (3,911,144)
Other................................... -- -- Cash paid in connection with
business combination......... (1,088,432) -- --
Overdraft bank balances
assumed in business
combination.................. (451,414) -- --
Capital expenditures.......... (649,604) (3,719,782) (1,967,989)
Other......................... (47,883) -- --
------------(261,668)
----------- ----------- ----------
Net cash provided by
(used in)used in investing
activities............. 8,877,003 (3,719,782) (1,967,989)
------------activities.......................... (14,958,853) (6,007,039) (4,081,562)
----------- ----------- ----------
FINANCING ACTIVITIES
Proceeds from bank borrowings. 21,000,000 5,719,933 6,510,580borrowings........... 11,500,000 12,000,000 1,800,000
Principal payments of bank borrowings................... (31,942,841) (1,756,856) (406,934)
Partnership contributions.....borrowings... (500,000) (10,963,919) (1,550,000)
Preferred stock dividends............... (1,255,638) (1,205,210) (644,800)
Retirement of preferred stock........... -- -- 300,647
Partnership distributions..... (1,132,735) (3,107,258) (4,073,185)(7,650) (74,357)
Payment of debt financing costs........................ (114,771)costs......... -- -- Preferred stock dividends..... (362,893) -- --
Organizational costs incurred. -- -- (89,944)
------------(10,256)
----------- ----------- ----------
Net cash provided by (used in)
financing activities............. (12,553,240) 855,819 2,241,164
------------activities................ 9,744,362 (176,779) (479,413)
----------- ----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........... (97,312) (41,376) 752,138EQUIVALENTS............................. (697,728) 448,807 (268,899)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD............ 710,762 752,138 --
------------PERIOD.................................. 793,358 344,551 613,450
----------- ----------- ----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD......................PERIOD.................................. $ 613,450 710,762 752,138
============95,630 793,358 344,551
=========== =========== ==========
NON CASH INVESTING ACTIVITIES
Accrued Capital Expenditures............ 1,981,276 1,290,658 81,230
See notes to consolidated financial statements.
21
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBERYears Ended December 31, 1995 AND 1994 AND PERIOD FROM JULY 15, 1993
(INCEPTION) THROUGH DECEMBER 31, 19931998, 1997, and 1996
PREFERRED STOCK COMMON STOCK
-------------------- ----------------------
PARTNER'S ADDITIONAL TOTAL
CAPITAL NUMBER NUMBER PAID-IN ACCUMULATED STOCKHOLDERS'
(DEFICIT) OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL DEFICIT EQUITY (DEFICIT)Series A Series B
Preferred Stock Preferred Stock Common Stock
----------------- ---------------- --------------------- Accumulated
Partners' Number Number Additional Other
Capital of Par of Par Number Paid-In Accumulated Comprehensive
(Deficit) Shares Value Shares Value of Shares* Par Value* Capital* Deficit Income
--------- ------- -------- ------- -------- ---------- --------- --------- ---------- ----------- ---------- ----------- ---------------------------- -------------
BALANCE AT JULY 15,
1993................... $
Balance at
December 31,
1995............. $-- 734,859 734,859 -- -- $5,225,564 1,045,113 8,515,929 (633,089) --
-- $ -- -- -- --
Partnership
contributions.......... 2,590,224Net income....... -- -- -- -- -- -- 2,590,224
Partnership
distributions.......... (4,073,185)-- -- 381,445 --
Unrealized Change
in Marketable
Equitable
Securities....... -- -- -- -- -- -- (4,073,185)
Net income.............. 494,184-- -- -- (189,900)
Total
Comprehensive
Income (Loss)....
Preferred stock
dividends--Series
A ($.80 per
share)........... -- -- -- -- -- -- 494,184
---------- ----------- -- (644,800) --
Retirement of
preferred stock.. -- (10,000) (10,000) -- -- -- -- (64,357) -- --
Reinstatement of
preferred stock
under Appraisal
rights........... -- 76,290 76,290 -- -- -- -- (76,290) -- --
--- ------- -------- ------- -------- --------- ---------- ----------- ------------ ---------
-------- ----------
BALANCE AT DECEMBERBalance at
December 31,
1993................... (988,777)1996............. $-- 801,149 801,149 -- -- 5,225,564 1,045,113 8,375,282 (896,444) (189,900)
Net loss......... -- -- -- -- -- -- (988,777)
Partnership
distributions.......... (3,107,258)-- -- (1,388,964) --
Unrealized Change
in Marketable
Equitable
Securities....... -- -- -- -- -- -- (3,107,258)
Net Income.............. 2,014,818-- -- -- 274,300
Total
Comprehensive
Income (Loss)....
Issuance of
Series B
Preferred Stock.. -- -- -- 750,000 750,000 -- -- 6,750,000 -- --
Preferred stock
dividends
Series A ($.80
per share)....... -- -- -- -- -- -- 2,014,818
---------- --------- --------- ---------- ----------- --------- -------- ----------
BALANCE AT DECEMBER 31,
1994................... (2,081,217)-- -- (638,023) --
Series B ($.76
per share)...... -- -- -- -- -- -- (2,081,217)
Partnership
distributions.......... (1,229,344) ---- ---- ---- ---- ---- ---- (1,229,344)
Business Combination.... 3,310,561 1,098,710 1,098,710 39,530,452 7,906,090 258,539 -- 12,573,900-- (567,187) --
Conversion of
preferred stock..................stock
to Common stock.. -- (363,851) (363,851) 2,274,058 454,812 (90,961)(3,831) (3,831) -- -- Preferred stock
dividends..............2,993 599 3,232 -- --
Employee Stock
grants........... -- -- -- -- -- 3,846 769 24,231 -- --
Retirement of
Series A
preferred stock.. -- (1,000) (1,000) -- -- -- -- (6,650) -- --
--- ------- -------- ------- -------- --------- ---------- ----------- ------------ ---------
Balance at
December 31,
1997............. $-- 796,318 796,318 750,000 750,000 5,232,403 1,046,481 15,146,095 (3,490,618) 84,400
Net loss......... -- -- -- -- -- -- (254,932) (254,932)
Net income..............-- -- (7,715,342) --
Unrealized Change
in Marketable
Equitable
Securities....... -- -- -- -- -- 1,032,562 (378,157) 654,405
---------- ----------- -- -- -- (485,300)
Total
Comprehensive
Income (Loss)....
Preferred stock
dividends........ -- -- -- -- -- -- -- -- (1,255,638) --
Employee and
director stock
grants........... -- -- -- -- -- 15,302 3,060 79,932 -- --
--- ------- -------- ------- -------- --------- ---------- ----------- ------------ ---------
-------- ----------
BALANCE AT DECEMBERBalance at
December 31,
1995................... $ -- 734,859 $ 734,859 41,804,510 $ 8,360,902 1,200,140 (633,089) 9,662,812
========== =========1998............. $-- 796,318 $796,318 750,000 $750,000 5,247,705 $1,049,541 $15,226,027 $(12,461,598) $(400,900)
=== ======= ======== ======= ======== ========= ========== =========== ============ =========
======== ==========
Total
Stockholders'
Equity
-------------
Balance at
December 31,
1995............. 9,662,812
Net income....... 381,445
Unrealized Change
in Marketable
Equitable
Securities....... (189,900)
-------------
Total
Comprehensive
Income (Loss).... 191,545
Preferred stock
dividends--Series
A ($.80 per
share)........... (644,800)
Retirement of
preferred stock.. (74,357)
Reinstatement of
preferred stock
under Appraisal
rights........... --
-------------
Balance at
December 31,
1996............. 9,135,200
Net loss......... (1,388,964)
Unrealized Change
in Marketable
Equitable
Securities....... 274,300
-------------
Total
Comprehensive
Income (Loss).... (1,114,664)
Issuance of
Series B
Preferred Stock.. 7,500,000
Preferred stock
dividends
Series A ($.80
per share)....... (638,023)
Series B ($.76
per share)...... (567,187)
Conversion of
preferred stock
to Common stock.. --
Employee Stock
grants........... 25,000
Retirement of
Series A
preferred stock.. (7,650)
-------------
Balance at
December 31,
1997............. 14,332,676
Net loss......... (7,715,342)
Unrealized Change
in Marketable
Equitable
Securities....... (485,300)
-------------
Total
Comprehensive
Income (Loss).... (8,200,642)
Preferred stock
dividends........ (1,255,638)
Employee and
director stock
grants........... 82,992
-------------
Balance at
December 31,
1998............. $4,959,388
=============
- - -----
* All share and dollar amounts have been restated to retroactively reflect the
March 1998 reverse stock split
See notes to consolidated financial statements.
22
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBERDecember 31, 19951998
NOTE A--BUSINESS COMBINATION
On August 15, 1995, the transactions contemplated by the Agreement and PlanA--Description of Merger among Patrick Petroleum Company ("Patrick"), La/Cal Energy Partners
("La/Cal"), Goodrich Petroleum Corporation (the "Company"), and Goodrich
Acquisition, Inc. were completed. The Agreement provided for a combination of
Patrick and La/Cal, as a result of which the businesses previously conducted
by Patrick and La/Cal are now conducted by the Company, which is a Delaware
corporation formed for the purpose of consummating such transactions, and its
subsidiaries. The combination of Patrick and La/Cal was effected primarily by
two concurrent transactions: (a) the contribution by La/Cal of all of its
assets and liabilities (excluding cash and accounts receivable accrued prior
to March 1, 1995, and interest thereon) to the Company in exchange for
19,765,226 shares of the Company's common stock (the "Common Stock") and (b)
the merger of Goodrich Acquisition with and into Patrick (the "Merger")
whereby (i) each outstanding share of Patrick common stock ("Patrick Common
Stock") was converted into one share of Common Stock; (ii) each outstanding
share of Patrick Series B Convertible Preferred Stock was converted into one
share of the Company's Series A Convertible Preferred Stock (except for 76,290
shares for which appraisal rights were preserved) and (iii) Patrick, the
surviving corporation in the Merger, became a wholly-owned subsidiary of the
Company.
La/Cal was formed, by the contribution of certain oil and gas properties
owned by the partners, on July 15, 1993, pursuant to the provisions of the
State of Louisiana, for the purpose of engaging in the domestic exploration
for oil and gas reserves primarily in the States of Louisiana and Texas. Under
the provisions of the Agreement of Partnership, the business of La/Cal was to
acquire interests in leases within a defined program area in Louisiana and
certain railroad districts in East Texas (as amended from time to time) and
drill primarily development wells. La/Cal also engaged in the development,
production, and sale of any commercial accumulations of oil and gas
discovered. Profits, losses, and distributable cash were allocated to the
individual partners as defined in the Partnership Agreement.
NOTE B--BASIS OF PRESENTATION
The combination transactions were accounted for as a purchase business
combination in accordance with Accounting Principles Board Opinion No. 16,
Business Combinations whereby La/Cal was deemed to be the acquiror and Patrick
the acquiree. Accordingly, on August 15, 1995, the Company recorded the assets
and liabilities of Patrick at fair value, whereas the assets and liabilities
of La/Cal are reflected at historical book value. The consolidated financial
statements reflect the operations solely of La/Cal for periods prior to August
15, 1995, whereas such financial statements reflect the operations of the
combined entities for periods subsequent to August 15, 1995.
NOTE C--DESCRIPTION OF BUSINESS
The Company is in the primary business of the exploration and production of
crude oil and natural gas. The Subsidiariessubsidiaries have interests in such operations
in eightseven states, primarily in Louisiana and Texas. TheTwo of the Company's
subsidiaries also havehad a minority interest in a natural gas pipeline joint
venture located in the state of Texas.Texas until such interest was sold in 1997.
NOTE D--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESB--Business Combinations
On January 31, 1997, the Company acquired the oil and gas properties of
La/Cal Energy Partners II ("La/Cal II") and certain working interest owners
for a purchase price of $16.5 million ("La/Cal II Acquisition"). The purchase
price was comprised of $1.5 million cash, the assumption of $7.5 million of
La/Cal II long-term debt and the issuance of 750,000 shares of Series B
convertible preferred stock of the Company ("Series B Preferred Stock") with
an aggregate liquidation value of $7.5 million. In connection with the La/Cal
II Acquisition, the Company borrowed an additional $9 million under its bank
credit facility, which was used to repay $7.5 million of La/Cal II debt and to
pay the $1.5 million cash portion of the purchase price. The Series B
Preferred Stock has a dividend rate of 8.25% per annum and each share of
Series B Preferred Stock is convertible into 1.12 shares of common stock. Such
shares are redeemable by the Company after January 31, 2001 at $10.00 per
share.
The La/Cal II acquisition was accounted for as a purchase business
combination and the operations of the related properties are included in the
Company's results of operations effective January 31, 1997.
NOTE C--Liquidity and Management's Plan
Liquidity--As disclosed in Note G, the Company's current liabilities include
the outstanding principal balance under the Company's credit facility of
$29,500,000. Additionally, the Company is unable to incur additional debt
under its credit facility or from any other sources until such time as its
stockholders' equity balance is greater than the liquidation preference of the
Series A Preferred Stock of approximately $7.9 million.
Management's Plan--Due to the Company's existing current working capital
deficiency, required pay downs under its credit facility and the restrictions
imposed by the Series A Preferred Stock, management is exploring a number of
alternatives that are directed toward making the Company profitable and
improving its liquidity. The principal strategies include:
1) raising additional capital through the issuance of equity securities;
or a combination of equity and subordinated debt;
2) acquisition of value enhancing oil and gas properties that offer
additional development opportunities and increased cash flow;
3) mergers and/or acquisitions by other entities;
4) reducing operating costs;
5) sale of certain oil and gas properties;
6) renegotiation or amendment of the Company's credit facility and
capital structure
As with any plan of this nature, its ultimate realization will depend upon
the cooperation of creditors, potential investors and others. As a result, the
outcome of the plan cannot presently be determined and no
23
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
adjustments related to the specific considerations of management's plan have
been made in the accompanying consolidated financial statements. Should the
plan not be completed, the Company may not be able to liquidate liabilities as
they come due.
NOTE D--Summary of Significant Accounting Policies
Principles of Consolidation--The consolidated financial statements include
the financial statements of Goodrich Petroleum Corporation, its wholly-owned
subsidiaries, and one of its wholly-owned subsidiary's three wholly-owned
subsidiaries. Significant intercompany balances and transactions have been
eliminated in consolidation.
Oil and gas revenues--Oil and gas revenues are recorded using the accrual
method of accounting.
Property and Equipment--The Company uses the successful efforts method of
accounting for exploration and development expenditures.
Leasehold acquisition costs are capitalized. When proved reserves are found
on an undeveloped property, leasehold cost is reclassified to proved
properties. Significant undeveloped leases are reviewed periodically, and a
valuation allowance is provided for any estimated decline in value. Cost of
all other undeveloped leases is amortized over the estimated average holding
period of the leases.
23
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
Costs of exploratory drilling are initially capitalized, but if proved
reserves are not found, the costs are subsequently expensed. All other
exploratory costs are charged to expense as incurred. Development costs are
capitalized, including the cost of unsuccessful development wells.
During the fourth quarter of 1995, theThe Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Underfollows SFAS No. 121 and recognizes an impairment is determined to have occurred and a loss is recognized when the
net of future cash inflows expected to be generated by an identifiable long-livedlong-
lived asset and cash outflows expected to be required to obtain those cash
inflows is less than the carrying value of the asset. The Company performs
this comparison for its oil and gas properties on a field-by-
fieldfield-by-field basis. The
amount of such loss is measured based on the difference between the discounted
value of such net future cash flows and the carrying value of the asset. The
Company recorded such an impairmentimpairments in 1998 and 1997 in the fourth quarteramounts of
1995 in$1,076,000 and $550,000, respectively. The impairments were the amountresult of
$157,000.
Prior to the adoption of SFAS 121, undiscounted future net revenues were
compared annually to net capitalized cost of all oil and gas properties to
determine if an impairment had occurred in the amount capitalized.certain fields depleting earlier than anticipated.
Depreciation and depletion of producing oil and gas properties are provided
under the unit-of-production method. Proved developed reserves are used to
compute unit rates for unamortized tangible and intangible development costs,
and proved reserves are used for unamortized leasehold costs. Estimated
dismantlement, abandonment, and site restoration costs, net of salvage value,
are considered in determining depreciation and depletion provisions.
Gains and losses on disposals or retirements that are significant or include
an entire depreciable or depletable property unit are included in income. All
other dispositions, retirements, or abandonments are reflected in accumulated
depreciation, depletion, and amortization.
Cash and Cash Equivalents--Cash and cash equivalents include cash on hand,
demand deposit accounts and temporary cash investments with maturities of
ninety days or less at date of purchase.
Marketable Equity Securities--In accordance with Statement of Financial
Accounting Standards No. 115, theSecurities--The Company has classified its investment in
marketable equity securities as available for sale. Accordingly, unrealized
holding gains and losses are excluded from earnings and are reported as a
separate component of stockholders'other
comprehensive income until realized. The Company sold its marketable equity
until realized.securities in January 1999.
24
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
Investment in Pipeline Joint Venture--TheVenture--Prior to its sale in October 1997, the
Company's investment consistsconsisted of a 20% interest in an intrastate natural gas
pipeline joint venture. The Company's carrying basis in the investment was
established at August 15, 1995 (fair value) and iswas being amortized on a basis
which matchesmatched the amortization with the monthly maximum average contract
quantities over the estimated remaining term of the joint venture which is estimatedventure.
Amortization amounted to terminate in 2000. Amortization$-0-, $741,000 and $1,060,000 for the yearyears ended
December 31, 1995 amounted to $403,254.1998, 1997 and 1996, respectively. The Company recordsrecorded its
equity in joint venture earnings as revenues onin the statement of operations.operations in
the periods when the contract payments were earned.
Income Taxes--The federal income tax effect of La/Cal's activities (prior to
August 15, 1995) is not reflected in the financial statements since such taxes
were the responsibility of the individual partners of La/Cal. The Company
became subject to income taxes as of August 15, 1995, as a result of the
business combination.
The Company follows the provisions of Statement of Financial Accounting
StandardsSFAS No. 109, Accounting
for Income Taxes which requires income taxes be accounted for under the asset
and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected 24
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Earnings Per Share--As discussed previously, La/Cal's activities priorShare--Basic income per Common share is computed by dividing
net income available for common stockholders, for each reporting period by the
weighted average number of Common shares outstanding during the period.
Diluted income per Common share is computed by dividing net income available
for common stockholders for each reporting period by the weighted average
number of Common shares outstanding during the period, plus the effects of
potentially dilutive Common shares.
Stock Based Compensation--The Company uses SFAS No. 123, Accounting for
Stock-Based Compensation, which permits entities to recognize as expense over
the business combination were conducted investing period the formfair value of a partnershipall stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply
the provisions of APB Opinion No. 25 Accounting for Stock Issued to Employees
and the
Company was established in corporate form on August 15, 1995. Earningsprovide pro forma net income and pro forma earnings per share information has been presented on a pro forma basis to reflect such
informationand other
disclosures for employee stock options grants made in 1995 and future years as
if La/Calthe fair-value-based method defined in SFAS No. 123 had been operated as a corporation forapplied. The
Company has elected to continue to apply the periods
presented.provisions of APB Opinion No. 25
and provide the disclosure provisions of SFAS No. 123.
Commitments and Contingencies--Liabilities for loss contingencies, including
environmental remediation costs, arising from claims, assessments, litigation,
fines and penalties, and other sources are recorded when it is probable that a
liability has been incurred and the amount of the assessment and/or
remediation can be reasonably estimated. Recoveries from third parties which
are probable of realization are separately recorded, and are not offset
against the related environmental liability.
Use of Estimates--Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
25
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
NOTE E--FAIR VALUE OF FINANCIAL INSTRUMENTSE--Fair Value of Financial Instruments
The following presents the carrying amounts and estimated fair values of the
Company's financial instruments at December 31, 1995. FASB Statement No. 107,
Disclosures about Fair Value of Financial Instruments, defines the fair value
of a financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties.1998 and 1997.
CARRYING FAIR
AMOUNT VALUE
--------- ---------December 31, 1998 December 31, 1997
---------------------- ---------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ---------- ---------- ----------
Financial asset--
Marketable equity securities........................securities.... $ 759,600 759,600358,700 358,700 844,000 844,000
Financial liabilities--
Other liabilities................................... 572,990 482,575liabilities............... 0 0 160,520 160,520
Long-term debt (including
current maturities)....... 9,750,000 8,770,098............ $29,500,000 29,500,000 18,500,000 18,500,000
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and cash equivalents, accounts receivable, accounts payables and
accrued liabilities: The carrying amounts approximate fair value because of
the short maturity of those instruments. Therefore, these instruments were not
presented in the table above.
Marketable equity securities: Fair value is based on bid prices published in
financial media.
Other liabilities and Long-termlong-term debt: The fair value is estimated by
discounting the future cash flows of each instrument at rates currently
offered to the Company for similar debt instruments of comparable maturities
by the Company's bankers.
25
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBERNOTE F--Accrued Liabilities
Accrued liabilities as of December 31, 1995
NOTE F--PATRICK ASSETS AND LIABILITIES ACQUIRED
On August 15, 1995, the Company recorded the combination transactions which
effect was primarily the recording1998 and 1997 consisted of the
assets and liabilities of Patrick at
their fair value. Such amounts were as follows:following:
1998 1997
---------- ---------
Cash overdraft.............................................
Advanced billings.................................... $ (451,414)
Marketable equity securities............................... 759,600
Accounts receivable........................................ 676,040
Prepaid expenses and other current assets.................. 12,745
Investment in Penske Corporation........................... 9,600,000
Investment in pipeline joint venture....................... 5,079,754
Property and equipment..................................... 10,780,422
Accounts payable........................................... (27,627)532,543 607,905
Accrued liabilities........................................ (1,438,070)
Long term debt............................................. (10,626,118)
Other liabilities.......................................... (703,000)
------------
$ 13,662,332
============interest..................................... 347,663 400,069
Other................................................ 933,487 1,700,381
---------- ---------
$1,813,693 2,708,355
========== =========
The former common shareholders of Patrick received 19,765,226 shares of the
Company's common stock and the former preferred shareholders of Patrick
effectively received 1,098,710 shares of the Company's preferred stock in the
business combination. As reflected in the consolidated statements of
stockholders' equity, the issuance of such shares resulted in an increase in
stockholders' equity of $12,573,900.
NOTE G--SALE OF INVESTMENT IN PENSKE CORPORATION
On September 18, 1995, the Company received $9,600,000 cash as redemption of
its investment in the Penske Corporation. The proceeds were used to pay down
the company's long term debt along with related accrued interest. No gain or
loss resulted from the transaction.
NOTE H--LONG TERM DEBT
Long-term debtG--Indebtedness
Indebtedness at December 31, 19951998 and 19941997 consists of the following:
1995 1994
-----------1998 1997
---------- ----------
Borrowings under credit facility, interest, at prime or
LIBOR plus 2% (see below) (weighted average rate at
December 31, 1995--7.89%1998--7.2%); principal due June 1, 1997........................................... $ 9,750,000 --
10% senior secured general obligation notes............. -- 10,066,723
----------- ----------
Total long-term debt.................................... 9,750,000 10,066,7232000... 29,500,000 18,500,000
Less current portion.................................... 29,500,000 --
1,816,723
--------------------- ----------
Long-term debt, excluding current portion............... $ 9,750,000 8,250,000
===========-0- 18,500,000
========== ==========
Long-term debt recorded on the26
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1994 balance sheet represented
La/Cal's 10% Senior Secured General Obligation Notes ("1998
At December 31, 1998, the General Obligation
Notes"). This debtCompany was paid offnot in compliance with proceeds froma restrictive
covenant of its existing credit facility, and, accordingly, the Company'sentire
principal amount outstanding is presented in current maturities of long-term
debt. The amount outstanding under the credit facility as of December 31, 1998
was $29,500,000. On March 29, 1999 the Company signed a preliminary agreement
with Compass Bank to restructure its existing credit facility. The preliminary
credit agreement will allow the Company has a credit facilityto be in compliance with a bank whichall covenants
upon execution of the agreement. The preliminary agreement provides for a
total
borrowing base determined by the bank every six monthsfacility of $20,500,000 with monthly reductions of $50,000
beginning on April 1, 1999 and May 1, 1999, $200,000 on June 1, 1999, and
$300,000 on July 1, 1999 and each month thereafter. Semi-annual borrowing base
determinations will be made beginning July 1, 1999 based in part based on the
Company's oil and gas reserves. Any and allreserve information. The maturity date for amounts drawn
are due and payable
on Juneunder the bank Borrowing Base facility is February 1, 1997.2001. Interest on related borrowingssuch
facility is based on either of two
methods at the option of the Company: the bank's prime lending rate or LIBOR plus 2%. Interest and rates are set on specific draws for
one, two, three or six month periods also at the option of the Company.
26
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
The originalpreliminary agreement also establishes a Tranche A facility in the
amount of $9,000,000. The maturity date for the Tranche A facility is December
1, 1999. The Tranche A requires that excess cash flow from operations, as
defined in the agreement, be applied to outstanding principal and interest
until the maturity date, with interest based on the Compass Bank Index Rate
plus 2%.
The preliminary agreement requires the net proceeds of asset sales be used
to extinguish outstanding principal and interest under the borrowing base
of $22,000,000 was reduced to $15,000,000 afterfacility and Tranche A. Additionally, under the saleterms of the Company's investmentpreliminary
agreement, the Company may not make any distributions or pay dividends,
including dividends on any class of its preferred stock, until Tranche A is
paid in full.
Additionally, budgeted capital expenditures are required to be approved by
the Penske Corporation (see Note G
above), in accordance withLender prior to closing, and such approval shall be effective for a period
of six months or until such time as an increase is requested. Furthermore,
provided actual capital expenditures do not exceed the specific provisionsapproved budgeted
amount, the determination of capital expenditures is at the sole discretion of
the credit facility.Company. The credit facilitypreliminary agreement also requires minimum net worth and debt service ratios be
maintained bythat the Company. On March 26, 1995, the bank amended the minimum net
worth covenant which lowered the minimum net worth requirement to $8,500,000
plus 50%Company's vendor
accounts payable balance shall not exceed $2,500,000 as of net income subsequent to SeptemberJune 30, 1995 effective December 1,
1995. Giving effect to such amendment, the Company had $1,027,326, available
for the payment of dividends1999. The
Company's vendor accounts payable balance was $3,721,000 at December 31, 1995.1998.
The preliminary agreement is subject to definitive documentation and Lender
credit approval.
Substantially all of the Company's assets are pledged to secure this credit
facility.
Interest paid during 1995, 19941998, 1997 and 1996 amounted to $1,904,809, $1,038,221
and $562,593, respectively.
NOTE H--Stockholders' Equity
Common Stock--On March 12, 1998 the period from July 15, 1993 (inceptionCompany effected a one for eight reverse
stock split of La/Cal) throughits common stock. All share and per share amounts of all
periods presented have been adjusted to retroactively give effect to the
reverse stock split.
At December 31, 1993 amounted to $968,190, $1,051,927 and
$194,738 respectively.
NOTE I--EXTRAORDINARY ITEM-EARLY EXTINGUISHMENT OF DEBT
La/Cal's General Obligation Notes1998 unissued shares of Goodrich common stock were paid off in connection with the
business combination and the related unamortized debt financing costsreserved
in the amount of $482,906 were charged to operations as an extraordinary item, in1,167,717 shares for the third quarterconversion of 1995.
NOTE J--ACCRUED LIABILITIES
Accrued liabilities asconvertible preferred
stock and 342,692 shares for stock option plans.
Preferred Stock
The Series A Convertible Preferred Stock has a par value of December 31, 1995$1.00 per share
with a liquidation preference of $10.00 per share, and 1994 consistedis convertible at the
option of the following:
1995 1994
----------- -------
Environmental contingency............................. $ 400,000 --
Current portion--consulting agreement contracts....... 387,000 --
Prior years' state income and franchise taxes......... 200,000 --
Taxes other than income............................... 160,000 --
Other................................................. 593,028 109,074
----------- -------
$ 1,740,028 109,074
=========== =======
NOTE K--PRO FORMA FINANCIAL RESULTS OF OPERATIONS (UNAUDITED)
Selected resultsholder at any time, unless earlier redeemed, into shares of
operations on a pro forma basis asCommon Stock of the Company at an initial conversion rate of .417 shares of
Common stock per share of Series A Preferred. The Series A Preferred Stock
also will automatically convert to Common Stock if the combination
transactions had occurredclosing price for the
Series A Preferred Stock exceeds $15.00 per share for ten consecutive trading
days. The Series A Preferred Stock is redeemable in whole or in part, at
$12.00 per share, plus accrued and unpaid dividends. Dividends on January 1, 1995the Series A
Preferred Stock accrue at an annual rate of 8% and January 1, 1994,
respectively, are as follows:
FOR THE YEAR ENDED
DECEMBER 31
-----------------------
1995 1994
----------- -----------
(UNAUDITED)
Revenues......................................... $11,588,318 $15,836,988
Income before extraordinary item................. 2,510,494 3,780,094
Net income....................................... 2,027,588 3,780,094
Income applicable to common stock................ 1,377,588 2,840,094
Income before extraordinary item per average
common share.................................... .04 .07
Income per average common share.................. $ .03 $ .07
cumulative.
27
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBERSTATEMENTS--(Continued)
December 31, 1998
The Company issued 750,000 shares of Series B Convertible Preferred Stock in
connection with its acquisition of the La/Cal II properties on January 31,
1997. The Series B Convertible Preferred Stock has a par value of $1.00 per
share with a liquidation preference of $10.00 per share and rank junior to the
Series A Preferred Stock. The shares of Series B Preferred Stock are convertible
at the option of the holder at any time, unless earlier redeemed, into shares of
Common Stock of the Company at the conversion rate of 1.12 shares of Common
Stock per share of Series B Preferred Stock. The Series B Preferred Stock are
not redeemable by the Company prior to January 31, 2001, and subsequently, are
redeemable at $10.00 per share. Dividends on the Series B Preferred Stock accrue
at an annual rate of 8.25% and are cumulative.
Stock Option and Incentive Programs--Goodrich currently has two plans which
provide for stock option and other incentive awards for the Company's key
employees, consultants and directors. The Goodrich Petroleum Corporation 1995
Stock Option Plan allows the Board of Directors to grant stock options,
restricted stock awards, stock appreciation rights, long-term incentive awards
and phantom stock awards, or any combination thereof to key employees and
consultants. The Goodrich Petroleum Corporation 1997 Director Compensation
Plan provides for the grant of stock and options to each director who is not
and has never been an employee of the Company. Additionally, Goodrich assumed
certain outstanding stock options of Patrick as a result of the business
combination in 1995.
The Goodrich plans authorize grants of options to purchase up to a combined
total of 437,500 shares of authorized but unissued common stock. Stock options
are generally granted with an exercise price equal to the stock's fair market
value at the date of grant and all stock options granted under the 1995 Stock
Option Plan generally have ten year terms and five year pro rata vesting.
The per share weighted-average fair value of stock options granted during
1998, 1997 and 1996 was $2.17, $2.57 and $3.06 on the date of grant using the
Black Scholes option-pricing model with the following weighted-average
assumptions: 1998--expected dividend yield 0%, risk-free interest rate of
7.5%, and an expected life of 6 years; 1997--expected dividend yield 0%, risk-
free interest rate of 7.5%, and an expected life of 6 years; 1996--expected
dividend yield 0%, risk-free interest rate of 7.5%, and an expected life of 6
years; expected volatility of stock over expected life of the options--35%.
The Company applies APB Opinion No. 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
the Company's net income (loss) would have been reduced to the pro forma
operationsamounts indicated below:
1998 1997 1996
----------- ---------- --------
Net income (loss).............. As reported $(7,715,342) (1,388,964) 381,445
Pro forma (7,715,342) (1,452,644) 225,135
Earnings (loss) applicable to
common stock.................. As reported (8,970,980) (2,594,174) (263,355)
Pro forma (8,970,980) (8,970,980) (419,665)
Basic and diluted earnings
(loss) per average common
share......................... As reported (1.71) (.50) (.05)
Pro forma (1.71) (.51) (.08)
Earnings Per Share--Both series of the Company's convertible preferred stock
and its stock options are considered to be potential common stock but have not
been included in the computation of diluted earnings per share because to do
so would have been antidillutive for all periods presented.
28
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
Stock option transactions during 1998, 1997 and 1996 were as follows:
Weighted Average
Remaining
Number of Weighted Average Range of Contractual
Options Exercise Price Exercise Price Life
---------------- ------------------------------------ -----------------
Patrick Patrick Patrick Patrick
Total Only Total Only Total Only Total Only
------- ------- -------- ----------------- --------- -------- --------
Outstanding January 1,
1996................... 333,200 196,950 14.24 18.56
Granted--1995 Stock
Option Plan........... 49,375 -- 6.08 --
Granted--1995 Non-
Employee Director
Stock Option Plan..... 11,250 -- 7.52 --
Expiration of Options.. (39,883) (39,883) 18.00 18.00
------- -------
Outstanding December 31,
1996 353,942 157,067 12.48 18.70 $6.00 to $16.00 to 5.4 yrs. 2.0 yrs.
$24.00 $24.00
Granted--1995 Stock
Option Plan........... 67,500 -- 6.48 --
Granted--1995 Non-
Employee Director
Stock Option Plan..... 6,250 -- 5.52 --
Expiration of Options.. (86,250) (86,250) 18.80 18.78
------- -------
Outstanding December 31,
1997 341,442 70,817 9.60 18.60 $5.50 to $16.00 to 7.4 yrs. 4.2 yrs.
======= =======
$24.00 $24.00
Granted--1995 Stock
Option Plan........... 144,000 -- 5.98 --
Granted--1998 Non-
Employee Director
Stock Option Plan..... 10,000 -- 5.98 --
Expiration of Options.. (62,190) (5,625) 7.88 19.33
------- -------
Outstanding December 31,
1998 433,252 65,192 $5.50 to $16.00 to 7.0 yrs. 3.4 yrs.
======= =======
$24.00 $24.00
Exercisable December 31,
1996................... 219,129 157,067 15.63 18.70
Exercisable December 31,
1997................... 172,317 70,817 $ 12.13 18.60
Exercisable December 31,
1998................... 208,379 65,192 $ 10.86 18.54
At the February 25, 1999 meeting, the Board of Directors approved a stock
option surrender/regrant program whereby employees and directors of the
Company could surrender their present options and be regranted options equal
to 75% of their previous number of options. Vesting periods for the year ended December 31, 1995 contain a net
gainnew
options began with the regrant date and the options have an exercise price
equal to the closing stock price on the saledate of an investment which accounted for $1,563,762declaration by the Board of
net incomeDirectors.
NOTE I--Commitments and $ .04 income per share. The operations information for the year ended
December 31, 1994 contains a net gain on sale of investments which accounted
for $6,447,102 of net income and $ .16 income per share. Also the operations
for the year ended December 31, 1994 has been adjusted to eliminate operations
related to certain oil and gas properties sold by Patrick in December, 1994 in
order to present comparable amounts.
NOTE L--COMMITMENTS AND CONTINGENCIESContingencies
The U.S. Environmental Protection Agency ("EPA") has identified the Company
as a potentially responsible party ("PRP") for the cost of clean-up of
"hazardous substances" at an oil field waste disposal site in Vermilion
Parish, Louisiana. The EPACompany has estimated that the totalremaining cost of long-termlong-
term clean-up of the site will be approximately $15.4$3.5 million with the
Company's percentage of responsibility to be approximately 3.09%3.05%. As of
December 31, 1995,1998, the Company has paid approximately $115,000$321,000 in costs
related to this matter and has $92,000 accrued an additional $400,000 for the remaining liability.
These costs have not been discounted to their present value. The EPA and the
PRPs will continue to evaluate the site and revise estimates for the long-
termlong-term
clean-up of the site. There can be no assurance that the cost of clean-up and
the Company's percentage responsibility will not be higher than currently
estimated by the EPA.estimated. In addition, under the federal environmental laws, the liability
costs for the
29
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
clean-up of the site is joint and several among all PRPs. Therefore, the
ultimate cost of the clean-up to the Company could be significantly higher
than the amount presently estimated or accrued for this liability.
Additionally, the Company is party to a number of lawsuits arising in the
normal course of business. The Company has defended and intends to continue to
defend these actions vigorously and believes, based on currently available
information, that adverse results or settlements, if any, in excess of
insurance coverage or amounts already provided, will not be material to its
financial position, liquidity or results of operations.
NOTE M--INCOME TAXESJ--Income Taxes
Income tax expense for the years ending December 31, 1998, 1997 and the
period from August 15, 19951996 through December 31, 19951996 consists of:
CURRENT DEFERRED TOTAL
--------Current Deferred Total
------- -------- -----
Year ended December 31, 1998:
U.S. Federal......................................Federal.................................... $ 25,000 (25,000) --
State and local................................... -- -- --
--------State........................................... -- -- --
------- ------------ ---
-- -- --
======= ======= ===
Year Ended December 31, 1997:
U.S. Federal.................................... $14,643 (14,643) --
State........................................... -- -- --
------- ------- ---
14,643 (14,643) --
======= ======= ===
Year Ended December 31, 1996:
U.S. Federal.................................... $ 25,000 (25,000) -- ========-- --
State........................................... -- -- --
------- ------- ---
-- -- --
======= ============ ===
Following is a reconciliation of the U.S. statutory income tax rate to the
Company's effective rate on lossincome (loss) before income taxes for the period from
August 15, 1995 throughyears
ended December 31, 1995:1998, 1997 and 1996:
1998 1997 1996
----- ----- -----
U.S. Statutory Income Tax Rate..................................Rate......................... (35.0)% (35.0)% 35.0%
Increase in deductible temporary differences for which
no benefit recorded............................................... 28.2recorded................................... 34.6 34.9 --
Change in the beginning of the year balance of the
valuation allowance allocated to income tax income
expense............................................... -- -- (35.5)
Nondeductible expenses.......................................... 6.8expenses................................. .4 .1 .5
----- ----- -----
-- -- --
===== ===== =====
28
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
The significant components of deferred income tax expense for the period
from August 15, 1995 throughyears
ended December 31, 19951998, 1997 and 1996 are as follows:
1998 1997 1996
---- ---------- ----
Deferred tax benefit (exclusive of utilization of net
operating loss carryforwards)............................... 657,938.......................... -- (1,023,016) --
Utilization of net operating loss carryforward............... 632,938
---------
$ (25,000)
=========carryforward.......... -- 1,008,373 --
--- ---------- ---
$-- (14,643) --
=== ========== ===
30
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilityliabilities at December
31, 19951998 and 1997 are presented below.
December 31, December 31,
1998 1998
------------ ------------
Deferred tax assets:
Differences between book and tax basis of:
Property and equipment.......................................... $ 307,025
Marketable equity securities.................................... 140,156securities................ $ 280,471 96,616
Contingent liabilities.......................................... 254,962liabilities...................... 158,873 198,469
Consulting agreement contracts.................................. 335,997
Other........................................................... 70,306contracts.............. -- 56,182
Other....................................... 65,199 65,199
Operating loss carryforwards.................. 13,109,624 11,742,835
Statutory depletion carryforward.............. 5,657,865 5,615,003
AMT Tax credit carryforward....................................... 1,392,176
Statutory depletion carryforward.................................. 4,943,209carryforward................... 1,477,872 1,460,869
Investment tax credit carryforward................................ 1,242,725
Operating loss carryforward....................................... 12,364,772carryforward............ 98,574 189,336
------------ ------------
Total gross deferred tax assets................................... 21,051,328assets............... 20,848,478 19,424,509
Less valuation allowance.......................................... (19,461,294)allowance...................... (19,104,959) (16,884,247)
------------ ------------
Net deferred tax assets........................................... 1,590,034assets....................... 1,743,519 2,540,262
------------ ------------
Deferred tax liability:
Differences between book and tax basis of investment in Pecos
pipeline........................................................ (1,565,034)of:
Property and equipment...................... (1,703,876) (2,500,619)
------------ ------------
Total gross deferred liability................................... (1,565,034)liability................ (1,703,876) (2,500,619)
------------ ------------
Net deferred tax asset...........................................asset........................ $ 25,00039,643 39,643
============ ============
The valuation allowance for deferred tax assets increased $658,000$2,221,000 for the
period from August 15, 1995 throughyear ended December 31, 1995 which substantially
offset1998 and decreased $3,845,000 for the change in certain deferred tax assets.year ended
December 31, 1997. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. Based primarily upon the level of projections for
future taxable income generated primarily by the reversal of future taxable
temporary differences over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences, net of the existing
valuation allowance at December 31, 1995.1998. The amount of the deferred tax
assets considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.
2931
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBERSTATEMENTS--(Continued)
December 31, 19951998
The following table summarizes the amounts and expiration dates of operating
loss and investment tax credit carryforwards:
Investment tax credit
Operating loss carryforwards carryforwards
---------------------------- ---------------------
Amount Expires Amount Expires
------ ------- ------- -------
OPERATING LOSS CARRYFORWARDS INVESTMENT TAX CREDIT CARRYFORWARDS
--------------------------------- --------------------------------------
AMOUNT EXPIRES AMOUNT EXPIRES
----------------- ------------ ------------------- -------
$ 511,282973,053 2005 $96,466 2001
$ 193,346 1996
2,994,824 2003 302,001 1997
4,801,898 2004 558,042 1998
1,551,278 2005 22,591 1999
7,564,3297,093,823 2006 68,171 2000
9,331,128 2007 96,466 2001
4,756,252 2008 2,108 2002
3,695,4458,860,622 2007
4,285,746 2008
3,247,494 2009
121,4845,480,870 2010
----------------- -------------------
$ 35,327,920 $ 1,242,725
================= ===================600,706 2011
1,926,031 2012
5,075,182 2018
----------- -------
$37,543,527 $98,574
=========== =======
As a result of the August 15, 1995 business combination, the Company's
annual utilization of its net operating and statutory depletion carryforwards
generated prior to the business combination are limited under Internal Revenue
Code Section 382. Such annual limitation is determined annually and is comprised of a
base amount of $1,682,797 plus any recognized "built in gains" existing at
August 15, 1995. Such limitation amounted to $13,056,000 in 1997 and is
estimated to be approximately $1,600,000 plus any built$19,727,000 in gains at the date of the business
combination.1998.
The Company's statutory depletion carryforwards and AMT credit carryovers
have no expiration date.
As described in Note D, no provision forThe Company paid income taxes for La/Cal was
includedof $4,344, $0 and $107,237 in the statements of operations prior to August 15, 1995 due to the
tax effect of Partnership activities being the responsibility of the
individual Partners.
At December 31, 1994, the book basis of La/Cal's net assets exceeded their
tax basis by $3,798,000 which would have resulted in a deferred income tax
liability of approximately $1,374,000 if La/Cal had been a taxable entity. The
pro forma tax effects of the temporary differences comprising this amount are
as follows at December 31, 1994:
Property and equipment--principally due to accumulated
depletion and depreciation................................. $ 1,105,000
Cash to accrual differences................................. 269,000
-----------
$ 1,374,000
===========
30
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 19951998, 1997 and
1996, respectively.
NOTE N--STOCKHOLDERS' EQUITY
Common Stock--At December 31, 1995, unissued shares of Goodrich common stock
were reserved in the amount of 2,447,080 shares for the conversion of
convertible preferred stock and 2,675,602 shares for stock option plans.
Preferred Stock--In accordance with the terms of the combination
transactions, all of the outstanding shares of Patrick's Series B Convertible
Preferred Stock were converted into Goodrich Series A Convertible Preferred
Stock except for 76,290 shares for which appraisal rights had been preserved.
The Preferred Stock has a par value of $1.00 per share with a liquidation
preference of $10.00 per share, is convertible at the option of the holder at
any time, unless earlier redeemed, into shares of Common Stock of the Company
at an initial conversion rate of 3.33 shares of Common stock per share of
Preferred. The Preferred Stock also will automatically convert to Common Stock
if the closing price for the Preferred Stock exceeds $15.00 per share for ten
consecutive trading days. Upon any conversion of a share of Preferred Stock
prior to the close of business on September 15, 1997, the stockholder will
receive one Common Stock purchase warrant to purchase one share of Common
Stock at $5.00 per share, subject to adjustment in certain events. Any
outstanding warrants can be called on thirty days notice for $4.25 per warrant
and will expire on September 15, 1997.
The Preferred Stock is redeemable in whole or in part, at $12.00 per share,
plus accrued and unpaid dividends. Dividends on the Preferred Stock accrue at
an annual rate of 8%.
As a result of the combination transactions, the Company was required to
offer a special conversion right to all holders of the Preferred Stock for a
period of 61 days beginning August 18, 1995. On October 18, 1995, holders of
363,851 shares of the Company's preferred stock elected to convert their
shares to Common Stock at an exchange rate of 6.25 to 1. This conversion
resulted in the Company issuing an additional 2,274,058 shares of Common Stock
and resulted in 734,859 preferred shares outstanding as of December 31, 1995.
Effective January 1, 1996, the preferred shares under appraisal rights were
reinstated, resulting in outstanding shares of 811,149.
Stock Option and Incentive Programs--Goodrich currently has two plans which
provide for stock option and other incentive awards for the Company's key
employees and consultants and its directors. The Goodrich Petroleum
Corporation 1995 Stock Option Plan allows the Board of Directors, through its
Compensation Committee, to grant stock options, restricted stock awards, stock
appreciation rights, long-term incentive awards, and phantom stock awards, or
any combination thereof to key employees and consultants. The Goodrich
Petroleum Corporation 1995 Nonemployee Director Stock Option Plan provides for
the grant of options to each director who is not and has never been an
employee of the Company.
Additionally, Goodrich assumed certain outstanding stock options of Patrick
as a result of the business combination.
31
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
Stock option transactions during 1995 were as follows:
NUMBER OF AVERAGE
OPTIONS PRICE
--------- -------
--------- -------
Outstanding January 1, 1995.................................. -- --
Assumed from Patrick....................................... 1,670,602 $ 2.32
Granted--1995 Stock Option Plan............................ 880,000 1.02
Granted--1995 Non Employee Director Stock Option Plan...... 220,000 0.97
Expiration of Options...................................... (95,000) 2.25
--------- ------
Outstanding December 31, 1995................................ 2,675,602 1.78
========= ======
Excercisable December 31, 1995............................... 1,890,602 $ 2.16
========= ======
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been
recognized for its stock option plans. During 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standard No. 123,
Accounting for Stock Based Compensation. This statement encourages companies
to recognize compensation expense for certain equity instrument issuances in
accordance with new fair value accounting guidelines. The Company has decided
not to adopt the recognition provisions of the Statement and will adopt the
disclosure provisions of the Statement in 1996.
NOTE O--PATRICK PETROLEUM EMPLOYEE BENEFIT PLANS
Patrick maintained several employee benefit plans prior to the business
combination. In accordance with the business combination, each of these plans
has been or is in the process of being terminated. Accordingly, the only
activities of these plans subsequent to August 15, 1995 were related to their
termination. At December 31, 1995, the Patrick Petroleum Corporation of
Michigan Defined Benefit Plan and Trust held assets of $1,731,000. The Plan is
fully funded and these assets are expected to be distributed to the
participants during 1996.
NOTE P--NATURAL GAS AND CRUDE OIL COST DATA AND RESULTS OF OPERATIONS.
The following reflects the Company's capitalized costs related to natural
gas and oil activities at December 31, 1995 and 1994:
1995 1994
----------- ---------
Proved properties................................... $15,271,879 7,271,549
Unproved properties................................. 990,154 --
----------- ---------
16,262,033 7,271,549
Less accumulated depreciation and depletion......... 2,209,924 1,309,866
----------- ---------
Net property and equipment........................ $14,052,109 5,961,683
=========== =========
32
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
The following table reflects certain data with respect to natural gas and
oil property acquisitions, exploration and development activities:
PERIOD FROM
JULY 15, 1993
YEAR ENDED DECEMBER 31, THROUGH
---------------------------DECEMBER 31,
1995 1994 1993
------------ ------------------------
Acquisition of proved
properties..................... 10,680,422(a) 2,112,308 1,250,000
Exploration costs............... 193,159 4,240 --
Development costs............... 514,431 1,600,235 717,989
- --------
(a) Properties acquired from Patrick.
Results of operations for natural gas and oil producing activities follow:
PERIOD FROM
JULY 15, 1993
YEAR ENDED DECEMBER 31, THROUGH
---------------------------DECEMBER 31,
1994 1994 1993
------------ ------------------------
Sales to unaffiliated customers. 5,477,208 4,995,663 1,059,882
Production costs (lease
operating expense and taxes)... 1,029,501 684,131 194,054
Exploration expenses............ 193,159 4,240 --
Impairment of Oil and Gas
Properties..................... 157,000 -- --
Depreciation, depletion and
amortization................... 1,356,060 1,138,635 171,231
------------ ---------- ---------
2,735,720 1,827,006 365,285
------------ ---------- ---------
Results of operations before pro
forma income taxes............. 2,741,488 3,168,657 694,597
Pro forma income taxes
(Unaudited).................... 970,703 1,235,776 270,893
------------ ---------- ---------
Pro forma results of operations
(Unaudited).................... $ 1,770,785 1,932,881 423,704
============ ========== =========
La/Cal operated as a partnership since its formation to the date of the
business combination (August 15, 1995) and, accordingly, did not directly pay
income taxes. Pro forma income tax expense and the results of oil and gas
operations as adjusted for pro forma income taxes is reflected above for that
period in order to reflect the impact of income taxes as if La/Cal had been
organized as a corporation.
No income taxes have been reflected for the Company since the business
combination due to its estimate that net operating loss and statutory
depletion loss carryforwards will be utilized to offset future taxable income.
NOTE Q--RELATED PARTY TRANSACTIONS.
La/Cal did not have any employees and was dependent on Goodrich Oil Company
to provide substantially all management of oil and gas operations and
administrative functions. La/Cal was not required to pay Goodrich Oil Company
for such services. Goodrich Oil Company was the operator of record of the
majority of the oil and gas properties in which La/Cal had an interest and
owned joint interests in such properties.K--Related Party Transactions.
The Company entered into additional transactions with Goodrich Oil Company subsequent to the business combination as more fully described
below. Goodrich Oil Company is owned by Henry Goodrich who is the chairman of
the Company and the father of Walter G. Goodrich, the Company's President and
Chief Executive Officer.
33During 1998, 1997 and 1996, the Company paid Goodrich Oil Company $0,
$74,981 and $118,775 for certain general and administrative expenses. There
were no amounts payable to Goodrich Oil Company at December 31, 1998 and 1997.
Goodrich Oil Company ceased to exist as an operating company in May 1997.
The Company paid $180,000, $167,500 and $150,000 to the Company's Chairman,
Mr. Henry Goodrich during 1998, 1997 and 1996, respectively, under a
consulting agreement which expires in August 2000.
NOTE L--Natural Gas and Crude Oil Cost Data and Results of Operations.
The following reflects the Company's capitalized costs related to natural
gas and oil activities at December 31, 1998 and 1997:
1998 1997
------------ ----------
Proved properties................................ $ 49,916,276 39,343,362
Unproved properties.............................. 3,412,897 1,811,325
------------ ----------
53,329,173 41,154,687
Less accumulated depreciation and depletion...... 13,592,827 8,798,501
------------ ----------
Net property and equipment..................... $ 39,736,346 32,356,186
============ ==========
32
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBERSTATEMENTS--(Continued)
December 31, 1995
Goodrich Oil Company continues1998
The following table reflects certain data with respect to benatural gas and
oil property acquisitions, exploration and development activities:
Year Ended December 31,
-----------------------------------
1998 1997 1996
----------- ---------- ---------
Property acquisition
Proved $ 129,325 17,308,540(a) 7,068
Unproved............................ 2,446,474 886,647 231,053
Exploration........................... 8,718,682 5,535,783 3,866,205
Development........................... 8,169,741 3,598,177 359,075
----------- ---------- ---------
$19,464,222 27,329,147 4,463,401
=========== ========== =========
- - --------
(a) Includes properties acquired in the operatorLa/Cal II Acquisition including
portions funded with Serial B Preferred Stock ($7,500,000)
Results of record of certainoperations for natural gas and oil and gas properties in whichproducing activities follow:
Year Ended December 31,
----------------------------------
1998 1997 1996
----------- ----------- ---------
Sales to unaffiliated customers............ $ 9,836,863 11,351,586 7,687,748
Production costs (lease operating expense
and taxes)................................ 2,821,515 2,316,006 1,614,584
Exploration expenses....................... 6,010,425 3,205,730 1,149,240
Impairment of oil and gas properties....... 1,075,853 549,792 --
Depreciation, depletion and amortization... 4,038,547 4,065,998 2,684,494
----------- ----------- ---------
13,946,340 10,137,526 5,448,318
----------- ----------- ---------
Results of operations...................... $(4,109,477) 1,214,060 2,239,430
=========== =========== =========
No income taxes have been reflected above for the Company has an interestdue to its
estimate that net operating loss and Goodrich Oil
Company owns joint interests in such properties.
The Company is a partystatutory depletion loss carryforwards
will be utilized to a Joint Participation Agreement with Goodrich Oil
Company pursuant to which the Companyoffset future taxable income.
NOTE M--Concentrations of Credit Risk and Goodrich Oil Company agree to offer
to the other a 50% participation interest in such company's share of all
drilling prospects and acquisitions of producing properties.
Included in accounts payable is $67,906 payable to Goodrich Oil Company at
December 31, 1995.
During 1995, the Company paid Goodrich Oil Company $222,530 for the
repayment of advances for business combination expenses and $50,132 for
general and administrative expenses.
The Company sold an airplane hangar and certain furniture and fixtures to
U.E. Patrick, Patrick's former chairman. Mr. Patrick paid the Company $137,329
for such items. The Company paid $118,750 during 1995 to Mr. Patrick under the
terms of a three-year consulting agreement expiring in August, 1998.
The Company paid $58,250 to Henry Goodrich during 1995 under a consulting
agreement which expires in August, 2000.
In connection with the business combination, Mr. Leo E. Bromberg, a partner
and member of the management committee of La/Cal received a finder's fee paid
in the form of 494,131 shares of the Company's common stock. Such shares were
included in the 19,765,226 shares of the Company's common stock received by
the La/Cal Partners in connection with the transactions.
NOTE R--CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERSSignificant Customers
Due to the nature of the industry the Company sells its oil and natural gas
production to a limited number of purchasers and, accordingly, amounts
receivable from such purchasers could be significant. Additionally, prior to
the Company receivessale of the Company's interest in its pipeline joint venture in 1997, it
received net monthly payments from its partner, Mitchell Marketing Company, in its pipeline joint venture.Company.
Revenues from these sources as a percent of total revenues for the periods
presented were as follows:
PERIOD FROM
JULY 15, 1993
YEAR ENDED DECEMBERYear Ended
December 31,
THROUGH
----------------------- DECEMBER 31,
1995 1994 1993
----------- ----------- -----------------------------
1998 1997 1996
---- ---- ----
Tenneco Gas Marketing Company.. -- 41% 70%
Seaber Corporation of Louisiana..................... 55% 48%Louisiana............................ 47% 44% 35%
Texaco..................................................... 12% 11% --
Navajo Refining Company.................................... 11% -- --
Mobil Oil Corporation.......... 16%Corporation...................................... -- --10% 22%
Mitchell Marketing Company.....Company................................. -- 9% -- --16%
33
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
NOTE N--Sales of Assets
On January 5, 1999 the Company sold its investment in marketable equity
securities. Proceeds from the sale amounted to $240,000 and resulted in a
realized loss of $520,000.
On April 22, 1998 the Company sold its interest in certain oil and gas
properties located in Texas for $49,000 resulting in a gain of $4,000.
On October 16, 1997, the Company sold its 20% interest in a natural gas
pipeline joint venture. The adjusted sales price was $3,564,000 and the
Company recognized a gain on the sale (both pre-tax and after-tax) in the
fourth quarter of 1997 of $688,304.
The Company sold its interests in certain oil and gas properties located in
Montana for $370,000 in 1997, resulting in a gain of $18. The Company sold its
interest in certain oil and gas properties located in North Dakota for
$325,000 in 1996, resulting in a gain of $88,000.
NOTE O--Acquisition of Oil Gas Properties
On January 31, 1997, the Company acquired the oil and gas properties of
La/Cal Energy Partners II ("La/Cal II") and certain working interest owners
for a purchase price of $16.5 million ("La/Cal II Acquisition"). The purchase
price was comprised of $1.5 million cash, the assumption of $7.5 million
La/Cal II long-term debt and the issuance of 750,000 shares of Series B
convertible preferred stock of the Company ("Series B Preferred Stock") with
an aggregate liquidation value of $7.5 million. In connection with the La/Cal
II Acquisition, the Company increased its borrowing base to $22.5 million and
borrowed an additional $9 million to payoff La/Cal II's debt and to pay the
cash portion of the purchase price.
Selected results of operations on a pro forma basis as if the La/Cal II
Acquisition had occurred on January 1, 1997 and January 1, 1996, respectively
are as follows:
For the year ended
December 31,
----------------------
1997 1996
---------- ----------
(Unaudited
Revenues.......................................... 13,422,000 14,370,000
Net income (loss)................................. (1,154,000) 1,715,000
Earnings (loss) applicable to common stock........ (2,411,000) 451,000
Basic and diluted earnings (loss) per average
common share..................................... (.46) .09
NOTE S--SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)P--Supplemental Oil and Gas Reserve Information (Unaudited)
The supplemental oil and gas reserve information that follows is presented
in accordance with Statement of Financial Accounting StandardsSFAS No. 69, (SFAS
No. 69), Disclosures about Oil and Gas Producing
Activities. The schedules provide users with a common base for preparing
estimates of future cash flows and comparing reserves among companies.
Additional background information follows concerning the schedules.
34
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
The supplemental oil and gas reserve information that follows relates to the
properties contributed to La/Cal by its Partners prior to its formation
(period from January 1, 1993 through July 14, 1993), properties owned by
La/Cal subsequent to formation but prior to the business combination with
Patrick (period from July 15, 1993 through December 31, 1993, year ended
December 31, 1994 and period form January 1, 1995 through August 14, 1995) and
properties of the combined entities (period from August 15, 1995 through
December 31, 1995. Therefore, the supplemental oil and gas information for
1993 is presented on a combined basis to include the properties contributed to
La/Cal prior to its inception. All of the subject reserves are located in the
continental United States.
Schedules 1 and 2--Estimated Net Proved Oil and Gas Reserves
TheSubstantially all of the Company's reserve information related to crude oil,
condensate, and natural gas liquids and natural gas was compiled based on
evaluations performed by several engineering firmsCoutret and Associates, Inc. All of the Company internally for all
years presented.subject
reserves are located in the continental United States.
34
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
Many assumptions and judgmental decisions are required to estimate reserves.
Quantities reported are considered reasonable but they are subject to future
revisions, some of which may be substantial, as additional information becomes
available. Such additional knowledge may be gained as the result of reservoir
performance, new geological and geophysical data, additional drilling,
technological advancements, price changes, and other factors.
Regulations published by the Securities and Exchange Commission define
proved reserves as those volumes of crude oil, condensate, and natural gas
liquids and natural gas that geological and engineering data demonstrate with
reasonable certainty are recoverable from known reservoirs under existing
economic and operating conditions. Proved developed reserves are those volumes
expected to be recovered through existing wells with existing equipment and
operating methods. Proved undeveloped reserves are those volumes expected to
be recovered as a result of making additional investment by drilling new wells
on acreage offsetting productive units or recompleting existing wells.
Schedule 3--Standardized Measure of Discounted Future Net Cash Flows to Proved
Oil and Gas Reserves
SFAS No. 69 requires calculation of future net cash flows using a ten
percent annual discount factor and year end prices, costs, and statutory tax
rates, except for known future changes such as contracted prices and
legislated tax rates.
The calculated value of proved reserves is not necessarily indicative of
either fair market value or present value of future cash flows because prices,
costs, and governmental policies do not remain static; appropriate discount
rates may vary; and extensive judgment is required to estimate the timing of
production. Other logical assumptions would likely have resulted in
significantly different amounts. Average crude oil prices received for oil and
the average price received by well for natural gas, effective at the end of
theeach year, were used for this calculation, and were $17.90$9.37 per Bblbbl and $2.01$2.24
per Mcf, respectively.
No income tax effect has been provided in the amounts belowrespectively as of December 31, 19941998, and 1993 due to the fact La/Cal was a partnership with all income
taxes being the responsibility$16.50 per Bbl and $2.59
per Mcf, respectively as of the partners themselves.December 31, 1997, and $23.88 per Bbl and $4.17
per Mcf, respectively as of December 31, 1996. Oil prices have subsequently
increased while gas prices have subsequently declined from December 31, 1998
levels.
Schedule 3 also presents a summary of the principal reasons for change in
the standard measure of discounted future net cash flows for each of the three
years in the period ended December 31, 1995.1998.
35
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
SCHEDULE 1--ESTIMATED NET PROVED GAS RESERVES (MCF)Schedule 1--Estimated Net Proved Gas Reserves (Mcf)
YEAR ENDED DECEMBERYear Ended December 31,
----------------------------------
1995 1994 19931998 1997 1996
---------- ---------- ----------
Proved:
Balance, beginning of period............. 21,983,004 17,550,038 9,313,69337,570,614 18,184,738 18,887,189
Revisions of previous estimates.......... (5,727,528) (702,870) (653,255)(8,393,772) (1,582,986) (3,989,734)
Purchase of minerals in place............ 5,324,607 4,380,429 3,769,789226,778 3,761,481 3,594
Extensions, discoveries, and other
additions............................... 375,800 3,141,537 6,041,1571,656,200 19,707,712 4,961,754
Production............................... (2,213,923) (2,386,130) (921,346)(2,782,825) (2,449,320) (1,623,377)
Sales of minerals in place............... (854,771) -- --(132,685) (51,011) (54,688)
---------- ---------- ----------
Balance, end of period..................... 18,887,189 21,983,004 17,550,038period................... 28,144,310 37,570,614 18,184,738
========== ========== ==========
Proved developed:
Beginning of period...................... 18,839,882 13,729,911 8,026,44516,600,669 13,911,003 13,815,905
End of period............................ 13,815,905 18,839,882 13,729,911
SCHEDULE 2--ESTIMATED NET PROVED OIL RESERVES (BARRELS)21,481,946 16,600,669 13,911,003
Schedule 2--Estimated Net Proved Oil Reserves (Barrels)
YEAR ENDED DECEMBERYear Ended December 31,
----------------------------------
1995 1994 1993
---------- ---------- -----------------------------------------
1998 1997 1996
--------- --------- ---------
Proved:
Balance, beginning of period............. 523,722 209,941 68,796period................ 4,098,390 1,050,210 940,147
Revisions of previous estimates.......... (236,934) (23,246) 51,806estimates............. (988,611) 132,327 44,980
Purchase of minerals in place............ 938,465 47,482 37,106place............... 0 1,614,779 --
Extensions, discoveries, and other
additions............................... 3,389 326,033 59,463
Production............................... (102,731) (36,488) (7,230)additions.................................. 299,799 1,685,438 278,129
Production.................................. (316,768) (282,380) (165,964)
Sale of minerals in place................ (185,764) -- --
---------- ---------- ----------place................... 0 (101,984) (47,082)
--------- --------- ---------
Balance, end of period................... 940,147 523,722 209,941
---------- ---------- ----------period...................... 3,092,810 4,098,390 1,050,210
========= ========= =========
Proved, developed:
Beginning of period...................... 504,908 174,641 30,179period......................... 2,292,626 969,868 920,557
End of period............................ 920,557 504,908 174,641
SCHEDULE 3--STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO
PROVED OIL AND GAS RESERVESperiod............................... 2,266,854 2,292,626 969,868
Schedule 3--Standardized Measure of Discounted Future Net Cash Flows Related to
Proved Oil and Gas Reserves
DECEMBERYear Ended December 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)--------------------------
1998 1997 1996
-------- ------- -------
(in thousands)
Future cash inflows........................ $ 51,615 44,878 38,098inflows............................... 86,449 155,542 96,668
Future production and development cost..... (8,267) (3,803) (2,765)costs........... (24,339) (26,906) (11,303)
Future income tax expense.................. (4,150) -- --
---------- ---------- ----------expense(a)...................... --0-- (24,177) (13,624)
-------- ------- -------
Future net cash flows before income tax
expense................................... 39,198 41,075 35,333flows............................. 62,110 104,459 72,013
10% annual discount for estimated timing of cash
flows................................ (12,316) (13,559) (13,900)
---------- ---------- ----------flows............................................ (21,475) (40,456) (24,656)
-------- ------- -------
Standardized measure of discounted future net cash
flows............................flows............................................ $ 26,882 27,516 21,433
========== ========== ==========40,635 64,003 47,357
======== ======= =======
Average year end prices:
Natural gas (per Mcf)........................... $ 2.24 2.59 4.17
Crude oil (per Bbl)............................. $ 9.37 16.50 23.88
- - --------
(a) Taxable income for 1998 period was entirely offset by available net
operating loss carry forwards.
36
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
PrincipalThe following are the principal sources of change in the standardized
measure of discounted net cash flows for the years shown:
YEAR ENDED DECEMBERYear Ended December 31,
-------------------------
1995 1994 19931998 1997 1996
-------- ------- ------- -------
(IN THOUSANDS)------
(in thousands)
Net changes in prices and production cost,
including excise taxes.......................... $ 829 $(2,978) $ 840costs related
to future production.............................. $(31,820) (32,327) 24,061
Sales and transfers of oil and gas produced, net of
production costs............................. (4,448) (4,312) (1,676)costs.................................. (7,015) (9,036) (6,073)
Net change due to revisions in quantity estimates.. (12,464) (991) (8,730)
Net change due to extensions, discoveries and
discoveries..................................... (8,327) 4,662 6,899improved recovery................................. 3,006 37,465 15,532
Net change due to purchase and sales of minerals-
in-place........................................ 11,090 5,105 4,549in-place.......................................... 82 16,065 (792)
Development costcosts incurred during the period...... 531 1,600 718period....... 2,198 3,598 359
Net change in income taxes....................... (3,475) -- --taxes......................... 14,093 (4,094) (6,524)
Accretion of discount............................ 2,752 2,143 931discount.............................. 7,810 5,736 3,036
Change in production rates (timing) and other.... 414 (137) (141)other...... 742 230 (394)
-------- ------- ------- -------
$ (634) $ 6,083 $12,120------
$(23,368) 16,646 20,475
======== ======= ======= =============
37
INDEPENDENT AUDITORS' REPORT
THE PARTNERS OF LA/CAL ENERGY PARTNERS:
We have audited the accompanying statement of revenues and direct operating
expenses of the Properties Contributed to La/Cal Energy Partners for the
period from January 1, 1993 through July 14, 1993. This financial statement is
the responsibility of the management of the owners of the properties. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenues and direct
operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall presentation of the statement. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and direct operating expenses was
prepared for the purpose of complying with certain rules and regulations of
the Securities and Exchange Commission and are not intended to be a complete
financial presentation of the Properties Contributed to La/Cal Energy
Partners.
In our opinion, such statement of revenues and direct operating expenses
presents fairly, in all material respects, the revenues and direct operating
expenses of the Properties Contributed to La/Cal Energy Partners as described
in the note to the statement for the period from January 1, 1993 through July
14, 1993, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Shreveport, Louisiana
March 31, 1995
38
PROPERTIES CONTRIBUTED TO LA/CAL ENERGY PARTNERS
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
PERIOD FROM
JANUARY 1,
1993
THROUGH
JULY 14,
1993
-----------
Revenues--oil and gas sales.................................. $ 946,939
Direct operating expenses--lease operating expenses and
production and property taxes............................... 136,808
---------
Excess of revenues over direct operating expenses............ $ 810,331
=========
BASIS OF PRESENTATION
The statement of revenues and direct operating expenses ("Statement") was
prepared from historical accounting records related to the properties. The
revenues and direct operating expenses relate to the net working interest in
the properties of their owners who ultimately contributed such properties to
La/Cal Energy Partners on July 15, 1993. Lease operating expenses include
labor, repairs and maintenance, fuel consumed and supplies utilized to operate
and maintain the wells and related equipment and facilities. The Statement
does not include general and administrative expenses, interest or provisions
for depreciation, depletion, amortization and dismantlement costs, or income
taxes.
Complete financial statements, including balance sheets, are not presented
as the properties were not maintained as a separate business unit and assets,
liabilities or indirect operating costs applicable to the properties were not
segregated. It is not practicable to identify all assets, liabilities, or
indirect operating costs applicable to the properties.
39
GOODRICH PETROLEUM CORPORATION
CONSOLIDATED QUARTERLY INCOME INFORMATION
(UNAUDITED)Consolidated Quarterly Income Information
(Unaudited)
FIRST SECOND THIRD FOURTH
1995 QUARTER QUARTER QUARTER QUARTER TOTAL
- ----First Second Third Fourth
Quarter Quarter Quarter Quarter Total
---------- --------- --------- ---------- ------------------- ---------- ----------
Revenues................. $1,133,420 1,047,620 1,549,524 2,443,848 6,174,4121998
Revenues.............. $2,433,577 2,264,397 2,697,743 3,196,156 10,591,873
Costs and expenses....... 675,368 568,837 1,295,987 2,496,909 5,037,101
Income (loss) before
extraordinary item and
income taxes............ 458,052 478,783 253,537 (53,061) 1,137,311
Extraordinary item--early
extinguishmentExpenses.... 3,446,298 5,215,164 4,813,328 4,836,631 18,311,421
Gain on sale of
debt..assets............... 4,206 -- -- 482,906 -- 482,9064,206
Net income (loss)........ 458,052 478,783 (229,369) (53,061) 654,405..... (1,008,515) (2,950,767) (2,115,585) (1,640,475) (7,715,342)
Preferred stock
dividends............ 313,912 313,902 313,912 313,912 1,255,638
Earnings (loss)
applicable to common
stock................ (1,322,427) (3,264,669) (2,429,497) (1,954,387) (8,970,980)
Basic earnings (loss)
per average common
share............. * * *share................ (.25) (.62) (.46) (.37) (1.71)
Diluted earnings
(loss) per average
common share......... $ -- *
1994
- ----
Revenues................. $ 881,912 1,115,823 1,637,786 1,377,925 5,013,446(.25) (.62) (.46) (.37) (1.71)
1997
Revenues.............. $3,597,401 3,068,455 3,170,563 3,064,942 12,901,361
Costs and expenses....... 539,017 631,418 888,803 939,390 2,998,628Expenses.... 2,860,461 3,049,380 3,409,319 5,659,469 14,978,629
Gain on sale of
assets............... 18 -- -- 688,286 688,304
Net income............... 342,895 484,405 748,983 438,535 2,014,818income (loss)..... 736,958 19,075 (238,756) (1,906,241) (1,388,964)
Preferred stock
dividends............ 263,315 314,102 313,891 313,902 1,205,210
Earnings (loss)
applicable to common
stock................ 473,643 (295,027) (552,647) (2,220,143) (2,594,174)
Basic earnings (loss)
per average share common
share....... * * * * *share................ .09 (.06) (.11) (.42) (.50)
Diluted earnings
(loss) per average
common share......... $ .09 (.06) (.11) (.42) (.50)
- --------
* Earnings per share information not presented duePrior to the entity not being a
taxable entity during the applicable periods. See pro forma presentationsale of
earnings per share.
As noted in Note B to the consolidated financial statements, the Company's operational financial results reflect the operations solely of La/Cal for the
periods prior to August 15, 1995, whereas such results reflect the operations
of the combined entities for the periods subsequent to August 15, 1995.
Accordingly,pipeline joint venture interest in the
fourth quarter of 1995 amounts for1997, the Company's quarterly revenues and costs and
expenses reflectwere impacted by the operations offact that the combined entities whereaspipeline joint venture contract
required higher revenue payments in November through March versus April
through October. Accordingly, the Company recorded the revenues as earned and
matched related amortization with such revenues. Related revenue and
amortization amounts for the first, second, third and fourth quarters of 1997
were approximately $551,000, $268,000, $266,000 and $0 and $392,000, $174,000,
$174,000 and $0, respectively.
The first, second, third and fourth quarter of 1995 reflect the operations solely of La/Cal from
July 1 through August 14, 1995 plus the operations of the combined entities
from August 15, 1995 through September 30, 1995.1998 cost and expense amounts
contain costs amounting to $0, $2,107,000, $1,496,000 and $81,000,
respectively, related to dry holes. The fourth quarter 1995 cost and expense amount also contains 1) a charge for
impairment of oil and gas properties of $157,000, 2) a provision for state
franchise taxes$1,076,000.
The third and fourth quarter 1997 cost and expense amounts contain costs
amounting to $472,000 and $1,855,000, respectively, related to dry holes. The
fourth quarter amount also contains impairment of approximately $60,000oil and 3) dry hole costsgas properties of
approximately $50,000.
ITEM$550,000.
All earnings (loss) per share information has been adjusted to give
retroactive effect to the one-for-eight reverse stock split in March 1998.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None
4038
PART III
ITEMItem 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.Directors and Executive Officers of the Registrant.
*
ITEMItem 11. EXECUTIVE COMPENSATION.Executive Compensation.
*
ITEMItem 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.Security Ownership of Certain Beneficial Owners and Management.
*
ITEMItem 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.Certain Relationships and Related Transactions.
*
*Reference is made to information under the captions "Election of Directors",
"Executive Compensation and Other Information"Compensation", "Security Ownership of Certain Beneficial Owners and
Management", and "Certain Relationships and OtherRelated Transactions", in the
Company's Proxy Statement for the 19961999 Annual Meeting of Stockholders.
4139
PART IV
ITEMItem 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORMExhibits, Financial Statement Schedules and Reports on Form 8-K.
PAGE
-----
(a)1. Financial Statements
The following consolidated financial statements of Goodrich Petroleum
Corporation are included in Part II, Item 8:
Page
-----
Independent Auditors' Report................................... 17Report............................................ 18
Consolidated Balance Sheets--December 31, 19951998 and 1994........ 18-191997................. 19
Consolidated Statements of Operations--Years ended December 31, 19951998,
1997 and 1994, and period from July 15, 1993 (inception)
through December 31, 1993.....................................1996.......................................................... 20
Consolidated Statements of Cash Flows--Years ended December 31, 1995, 19941998,
1997 and period from July 15, 1993 (inception) through
December 31, 1993.............................................1996.......................................................... 21
Consolidated Statements of Stockholders' Equity--Years ended December
31, 19951998, 1997 and 1994 and period from July 15, 1993
(inception) through December 31, 1993.........................1996................................................ 22
Notes to Consolidated Financial Statements--Years ended December 31,
1995, 19941998, 1997 and 1993..............................1996.................................................... 23-37
Independent Auditor's Report--Properties Contributed to La/Cal
Energy Partners............................................... 38
Statement of Revenues and Direct Operating Expenses--Period
from January 1, 1993 through July 14, 1993--Properties
Contributed to La/Cal Energy Partners......................... 39
Consolidated Quarterly Income Information (Unaudited).......... 40
2. Financial Statement Schedules
The schedules for which provision is made in Regulation S-X are not
required under the instructions contained therein, are inapplicable,
or the information is included in the footnotes to the financial
statements.
(b) Reports on Form 8-K
During the fourth quarter 1995 the Company filed a Form 8-K dated October
18, 1995 reporting the conversion of 363,851 shares of its Series A
Convertible Preferred Stock into 2,252,496 shares of its common stock.................... 38
2. Financial Statement Schedules
The schedules for which provision is made in Regulation S-X are not required
under the instructions contained therein, are inapplicable, or the information
is included in the footnotes to the financial statements.
(b) Reports on Form 8-K
None
(c) Exhibits
3. (i)3(i).1 Amended and Restated Certificate of Incorporation of the Company
dated August 15, 1995, and filed with the Secretary of State of the
State of Delaware on August 15, 1995 (Incorporated by reference to
Exhibit 3.1 of the Company's Quarterly Report filed on Form 10-Q for
the three months ended September 30, 1995).
(ii)3(i).2 Certificate of Amendment of Restated Certificate of Incorporation of
Goodrich Petroleum Corporation dated March 12, 1998.
3(ii).1 Bylaws of the Company, as amended and restated (Incorporated by
reference to Exhibit 3.2 of the Company's Quarterly Report filed on
Form 10-Q for the three months ended September 30, 1995).
4.1 Credit Agreement Between Goodrich Petroleum Company of Louisiana and
Compass Bank-Houston dated August 15, 1995 and Amendment thereto
dated December 15, 1995. (Incorporated by reference to Exhibit 4.1 of
the Company's Annual Report filed on Form 10-K for the year ended
December 31, 1995)
4.2 Second Amendment to Credit Agreement between Goodrich Petroleum
Company of Louisiana and Compass Bank dated June 1, 1996
(Incorporated by reference to Exhibit 4 of the Company's Quarterly
Report filed on Form 10-Q for the three months ended June 30, 1996.)
4.3 Third Amendment to Credit Agreement between Goodrich Petroleum
Company of Louisiana, GPC, Inc. of Louisiana and Compass Bank dated
January 31, 1997. (Incorporated by reference to Exhibit 4.3 of the
Company's Annual Report filed on Form 10-K for the year ended
December 31, 1996.
4.4 Fourth Amendment to Credit Agreement between Goodrich Petroleum
Company of Louisiana, GPC, Inc. of Louisiana and Compass Bank dated
June 1, 1997. (Incorporated by reference to Exhibit 4.4 of the
Company's Form 10-Q for the year ended March 31, 1997.)
4.5 Fifth Amendment to Credit Agreement between Goodrich Petroleum
Company of Louisiana, GPC, Inc. of Louisiana and Compass Bank dated
October 16, 1997. (Incorporated by reference to Exhibit 4.4 of the
Company's Form 10-Q for the year ended March 31, 1997.)
4.6 Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.6 of the Company's Registration Statement No. 33-01077 filed February
20, 1996 on Form S-8)S-8 (File No. 33-01077)).
40
4.7 Series B Convertible Preferred Stock Certificate of Designations.
(Incorporated by reference to Exhibit 4.6 of the Company's Annual Report
on Form 10-K for the year ended December 31, 1996).
4.8 Amendment letter related to the Credit Agreement between Goodrich
Petroleum Company of Louisiana, GPC, Inc. of Louisiana and Compass Bank
dated August 27, 1998.
4.9 Sixth amendment to the Credit Agreement between Goodrich Petroleum
Company of Louisiana and Compass Bank dated March 27, 1998.
4.10 Seventh amendment to the Credit Agreement between Goodrich Petroleum
Company, LLC (formerly Goodrich Petroleum Company of Louisiana) and
Compass Bank dated December 21, 1998.
10.1 Goodrich Petroleum Corporation 1995 Stock Option Plan (Incorporated by
reference to Exhibit 10.21 to the Company'Company's Registration Statement filed
June 13, 1995 on Form S-4 (File No. 33-58631)).
10.2 Goodrich Petroleum Corporation 1995 Nonemployee Director Stock Option
Plan (Incorporated by reference to Exhibit 10.22 to the Company's
Registration Statement filed June 13, 1995 on Form S-4 (File No. 33-
58631)).
42
10.3 Patrick Petroleum Company 1993 Stock Option Plan (Incorporated by
reference to Exhibit 10.11 to the Company's Registration Statement filed
June 13, 1995 on Form S-4 (File No. 33-58631)).
10.4 Form of Joint Participation Agreement between the Company and Goodrich
Oil Company (Incorporated by reference to Exhibit 10.18 to the
Company's Registration Statement filed June 13, 1993 on Form S-4 (No.
33-58631)).
10.510.3 Form of Marketing Agreement between the Company and Natural Gas
Ventures, L.L.C. (Incorporated by reference to Exhibit 10.19 to the
Company's Registration Statement filed June 13, 19931995 on Form S-4 (No.(File
No. 33-58631)).
10.610.4 Natural Gas Marketing Joint Venture Agreement between Seaber Corporation
and Natural Gas Ventures, L.L.C. (Incorporated by reference to Exhibit
10.20 to the Company's Registration Statement filed June 13, 19931995 on
Form S-4 (No.(File No. 33-58631)).
10.710.5 Form of Consulting Services Agreement between the Company and Henry
Goodrich (Incorporated by reference to Exhibit 10.23 to the Company's
Registration Statement filed June 13, 19931995 on Form S-4 (No.(File No. 33-
58631)).
10.810.6 Form of Employment Agreement between the Company and Walter G. Goodrich
(Incorporated by reference to Exhibit 10.24 to the Company's
Registration Statement filed June 13, 19931995 on Form S-4 (No.(File No. 33-
58631)).
10.910.7 Consulting Agreement with U.E. Patrick (Incorporated by reference to
Exhibit 10.25 to the Company's Registration Statement filed June 13,
19931995 on Form S-4 (No.(File No. 33-58631)).
10.1010.8 Consulting Services Agreement between Leo E. Bromberg and Goodrich
Petroleum Corporation (Incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report filed on Form 10-Q for the three months ended
September 30, 1995.)1995).
10.9 Goodrich Petroleum Corporation 1997 Director Compensation Plan
(Incorporated by reference to the Company's Proxy statement dated May
20, 1998)
21 Subsidiaries of the Registrant
Goodrich Petroleum CompanyCorporation, Inc. of Louisiana--incorporated in the
state of Nevada
Goodrich Petroleum Company LLC--incorporated in state of Louisiana
Subsidiaries of Goodrich Petroleum Company of Louisiana
Drilling & Workover Company, Inc.--incorporated in state of Louisiana
LECE, Inc.--incorporated in the state of Texas
National Market Company--incorporated in state of Delaware
Pecos Pipeline & Producing Company--incorporated in the state of
Texas
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule, included elsewhere herein
4341
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTIONPursuant to the requirements of Section 13 ORor 15 (D) OF THE SECURITIES
EXCHANGE ACT OF(d) of the Securities
Exchange Act of 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
GOODRICH PETROLEUM CORPORATION
(Registrant)
Date: March 28, 199629, 1999 /s/ Walter G. Goodrich
By: _________________________________By___________________________________
Walter G. Goodrich, President,
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OFPursuant to the requirements of the Securities Exchange Act of 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Date: March 28, 199629, 1999
SIGNATURE TITLE
--------- -----
Signature Title
Chief Executive Officer and
/s/ Walter G. Goodrich Director (Principal Executive
- -------------------------------------------- ----------------------------------- Officer)
Walter G. Goodrich
Senior Vice President, Chief Executive Officer and
Director (Principal Executive Officer)
/s/ Roland L. Frautschi - -------------------------------------------
Roland L. Frautschi Senior Vice President, Treasurer and Chief Financial
- - ----------------------------------- Officer (Principal Financial
Roland L. Frautschi Officer)
/s/ Glynn E. Williams, Jr.
- -------------------------------------------
Glynn E. Williams, Jr.
Vice President (Principal
Accounting
Officer)
/s/ Lonnie J. Shaw Accounting Officer)
- - -----------------------------------
Lonnie J. Shaw
/s/ Sheldon Appel Director Treasurer
- -------------------------------------------- -----------------------------------
Sheldon Appel Director
/s/ Jeff H. Benhard
- -------------------------------------------
Jeff H. Benhard Director
/s/ Basil M. Briggs Director
- -------------------------------------------- -----------------------------------
Basil M. Briggs Director
/s/ Benjamin F. Edwards IIDirector
- -------------------------------------------- -----------------------------------
Benjamin F. Edwards
II Director
/s/ Henry Goodrich Director
- -------------------------------------------- -----------------------------------
Henry Goodrich Director
/s/ James R. Jenkins
- -------------------------------------------
James R. Jenkins Director
/s/ Wayne G. Kees
- -------------------------------------------
Wayne G. Kees Director
- -------------------------------------------
John C. Napley Director
/s/ Arthur A. Seeligson IIIDirector
- -------------------------------------------- -----------------------------------
Arthur A. Seeligson
III/s/ Jeff Benhard Director
/s/ J. Michael Watts
- -------------------------------------------
J. Michael Watts Director- -----------------------------------
Jeff Benhard
4442