UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT 1934
For the quarterly period ended March 31, 2001
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT 1934
For the transition period from to
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Commission File Number: 1-7940
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Goodrich Petroleum Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 76-0466193
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(State or other jurisdiction of (I.R.S. Employer ID. No.)
incorporation or organization)
815 Walker Street, Suite 1040, Houston, Texas 77002
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(Address of principal executive offices) (ZipCode)
(713) 780-9494
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(Registrant's telephone number, including area code)
None
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(Former name, former address and former fiscal year, if changed
since last report.)
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. [ X ] Yes [ ] No
At May 11, 2001 there were 17,565,139 shares of Goodrich Petroleum
Corporation common stock outstanding.
1
GOODRICH PETROLEUM CORPORATION
FORM 10-Q
March 31, 2001
INDEX
Page No.
--------
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
March 31, 2001 (Unaudited) and December 31, 2000........... 3-4
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 2001 and 2000................. 5
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2001 and 2000................. 6
Consolidated Statements of Stockholders' Equity
and Comprehensive Income (Unaudited)
Three Months Ended March 31, 2001 and 2000................. 7
Notes to Consolidated Financial Statements.................... 8-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 11-15
PART II - OTHER INFORMATION 16
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
2
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, December 31,
2001 2000
--------- -----------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents..........................$ 2,768,373 3,531,763
Accounts receivable
Trade and other, net of allowance................ 476,511 241,659
Accrued oil and gas revenue...................... 5,193,529 4,553,863
Prepaid insurance.................................. 287,167 238,647
---------- -----------
Total current assets........................... 8,725,580 8,565,932
---------- -----------
PROPERTY AND EQUIPMENT
Oil and gas properties (successful efforts method). 85,155,464 79,252,980
Furniture, fixtures and equipment.................. 241,807 240,150
----------- -----------
85,397,271 79,493,130
Less accumulated depletion,
depreciation and amortization................ (27,708,907) (26,044,257)
---------- -----------
Net property and equipment....................... 57,688,364 53,448,873
---------- -----------
OTHER ASSETS
Restricted cash.................................... 1,450,000 1,240,000
Deferred Taxes..................................... 756,371 1,694,675
Other.............................................. 4,015 394,114
---------- -----------
Total other assets............................ 2,210,386 3,328,789
---------- -----------
TOTAL ASSETS...............................$ 68,624,330 65,343,594
========== ===========
See notes to consolidated financial statements.
3
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
March 31, December 31,
2001 2000
--------- ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable..............................$ 4,033,465 3,043,477
Accrued liabilities........................... 1,760,206 1,231,965
Derivative liability.......................... 940,336 ---
Current portion other non-current liabilities. 808,337 820,454
---------- -----------
Total current liabilities................... 7,542,344 5,095,896
---------- -----------
LONG TERM DEBT.................................. 9,275,000 22,965,000
OTHER NON-CURRENT LIABILITIES
Production payment payable.................... 865,565 969,870
Accrued abandonment costs..................... 3,849,898 3,707,612
STOCKHOLDERS' EQUITY
Preferred stock; authorized 10,000,000 shares:
Series A convertible preferred stock, par
value $1.00 per share; issued and outstanding
791,968 and 791,968 shares (liquidating preference
$10 per share, aggregating to $7,919,680)... 791,968 791,968
Series B convertible preferred stock, par
value $1.00 per share; issued and
outstanding 0 and 660,759 shares............ --- 660,839
Common stock, par value $0.20 per share; authorized
25,000,000 shares; issued and outstanding
17,515,930 and 13,318,520 shares............ 3,503,186 2,663,784
Additional paid-in capital................... 52,145,183 39,348,013
Accumulated deficit.......................... (8,737,595) (10,859,388)
Accumulated other comprehensive income....... (611,219) ---
---------- -----------
Total stockholders' equity.............. 47,091,523 32,605,216
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY...$ 68,624,330 65,343,594
========== ===========
See notes to consolidated financial statements.
4
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
2001 2000
-------- --------
REVENUES
Oil and gas sales....................................$ 9,351,275 4,488,948
Other .............................................. 54,415 184,842
---------- -----------
Total revenues....................................... 9,405,690 4,673,790
---------- -----------
EXPENSES
Lease operating expense and production taxes......... 2,042,070 1,340,665
Depletion, depreciation and amortization............. 1,535,177 1,303,763
Exploration.......................................... 1,056,716 360,814
Interest expense..................................... 370,523 1,182,438
General and administrative........................... 624,651 479,015
Hedge Premium Expense................................ 306,996 ---
Preferred dividend requirements of a subsidiary...... --- 38,364
---------- -----------
Total costs and expenses............................. 5,936,133 4,705,059
---------- -----------
GAIN ON SALE OF ASSETS................................. 38,380 563
---------- -----------
INCOME (LOSS) BEFORE INCOME TAXES...................... 3,507,937 (30,706)
Income taxes......................................... 1,227,778 ---
---------- -----------
NET INCOME(LOSS)....................................... 2,280,159 (30,706)
Preferred stock dividends............................ 2,534,908 307,607
---------- -----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK........... (254,749) (338,313)
========== ===========
BASIC INCOME(LOSS) PER AVERAGE COMMON SHARE............ (.02) (.05)
========== ===========
DILUTED INCOME(LOSS) PER AVERAGE COMMON SHARE.......... (.02) (.05)
========== ===========
AVERAGE COMMON SHARES OUTSTANDING (BASIC AND DILUTED).. 16,112,677 6,965,415
========== ===========
See notes to consolidated financial statements.
5
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
2001 2000
------- -------
OPERATING ACTIVITIES
Net income(loss)......................................$ 2,280,159 (30,706)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depletion, depreciation and amortization........... 1,535,177 1,303,763
Deferred income taxes.............................. 1,227,778 ---
Amortization of leasehold costs.................... 273,467 274,279
Amortization of production payment discount........ 33,022 ---
Amortization of deferred debt financing............ 32,250 111,089
Accrued interest on private placement borrowings... --- 246,660
Amortization of detachable stock purchase warrants. --- 142,500
Preferred dividends of subsidiary.................. --- 38,364
Gain on sale of assets............................. (38,380) (563)
Capital expenditures charged to income............. 292,100 ---
Payment of Contingent liability.................... (1,708) ---
Net change in:
Accounts receivable................................ (874,518) (1,081,262)
Prepaid insurance and other........................ 8,465 4,718
Accounts payable................................... 989,989 183,171
Accrued liabilities................................ 148,241 (464,822)
Other liabilities.................................. --- (484,525)
---------- ----------
Net cash provided by operating activities........ 5,906,042 242,666
---------- ----------
INVESTING ACTIVITIES
Proceeds from sale of assets........................... 418,380 126,050
Acquisition of oil and gas properties................. --- (1,198,631)
Capital expenditures.................................. (6,196,241) (1,104,727)
----------- -----------
Net cash used in investing activities............ (5,777,861) (2,177,308)
----------- -----------
FINANCING ACTIVITIES
Proceeds from public offering of common stock......... 15,000,000 4,500,000
Principal payments of bank borrowings.................(13,690,000) (1,025,264)
Payment of debt and equity financing costs............ (1,695,323) (30,000)
Exercise of stock purchase warrants................... --- 217,511
Exercise of stock options............................. 11,563 9,875
Net change in restricted cash......................... (210,000) (1,250,000)
Production payments................................... (149,445) (30,599)
Preferred stock dividends............................. (158,366) ---
----------- -----------
Net cash (used in)provided by financing activities.. (891,571) 2,391,523
----------- -----------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS..... (763,390) 456,881
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,531,763 5,929,229
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..............$ 2,768,373 6,386,110
========== ==========
See notes to consolidated financial statements.
6
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Three Months Ended March 31, 2001 and 2000
(Unaudited)
Series A Series B
Preferred Stock Preferred Stock Common Stock
--------------- --------------- ------------
Balance at December 31, 1999.............. 796,318 $ 796,318 665,759 $ 665,759 5,417,171 $ 1,083,434
Net Loss.................................. --- --- --- --- --- ---
Total Comprehensive Loss.................. --- --- --- --- --- ---
Issuance of Common Stock.................. --- --- --- --- 1,533,333 306,667
Conversion of Preferred Stock of
Subsidiary to Common Stock............... --- --- --- --- 1,547,665 309,533
Exercise of Director Stock Option......... --- --- --- --- 12,500 2,500
Exercise of Common Stock Purchase Warrants --- --- --- --- 220,011 44,002
------- -------- -------- ------- ---------- ---------
Balance at March 31, 2000................. 796,318 $ 796,318 665,759 $ 665,759 8,730,680 $ 1,746,136
======= ======== ======== ======= ========== =========
Balance at December 31, 2000.............. 791,968 791,968 660,839 660,839 13,318,920 2,663,784
Net Income................................ --- --- --- --- --- ---
Other Comprehensive Income (Loss); Net of
Tax
Cumulative Effect of Accounting Change.. --- --- --- --- --- ---
Net Derivative Gain..................... --- --- --- --- --- ---
Reclassification Adjustment............. --- --- --- --- --- ---
Total Comprehensive Income................ --- --- --- --- --- ---
Issuance of Common Stock.................. --- --- --- --- 3,000,000 600,000
Conversion of Series B Preferred Stock to
Common Stock....................... --- --- (660,839) (660,839) 1,189,510 237,902
Preferred Stock Dividends................. --- --- --- --- --- ---
Exercise of Stock Options................. --- --- --- --- 7,500 1,500
------- -------- -------- ------- ---------- ---------
Balance at March 31, 2001................. 791,968 $ 791,968 --- $ --- 17,515,930 $ 3,503,186
======= ======== ======== ======= ========== =========
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Three Months Ended March 31, 2001 and 2000
(Unaudited)
Accumulated
Additional Other Total
Paid-In Accumulated Comprehensive Stockholders'
Capital Deficit Income Equity
------- ------- ------- ------
Balance at December 31, 1999.............. $ 18,156,114 $(14,290,581) $ --- $ 6,411,044
Net Loss.................................. --- (30,706) --- (30,706)
----------
Total Comprehensive Loss.................. --- --- --- (30,706)
Issuance of Common Stock.................. 4,193,333 --- --- 4,500,000
Conversion of Preferred Stock of
Subsidiary to Common Stock.............. 2,411,956 --- --- 2,721,489
Exercise of Director Stock Option......... 7,375 --- --- 9,875
Exercise of Common Stock Purchase Warrants 173,509 --- --- 217,511
---------- ----------- ---------- ----------
Balance at March 31, 2000................. $ 24,942,287 $(14,321,287) $ --- $ 13,829,213
========== =========== ========== ==========
Balance at December 31, 2000.............. 39,348,013 (10,859,388) --- 32,605,216
Net Income................................ --- 2,280,159 --- 2,280,159
Other Comprehensive Income (Loss); Net of
Tax
Cumulative Effect of Accounting Change.. --- --- (2,535,469) (2,535,469)
Net Derivative Gain..................... --- --- 936,254 936,254
Reclassification Adjustment............. --- --- 987,986 987,986
----------
Total Comprehensive Income................ --- --- --- 1,668,940
Issuance of Common Stock.................. 12,469,170 --- --- 13,069,170
Conversion of Series B Preferred Stock to
Common Stock....................... 317,937 --- --- (105,000)
Preferred Stock Dividends................. --- (158,366) --- (158,366)
Exercise of Stock Options................. 10,063 --- --- 11,563
---------- ---------- ---------- ----------
Balance at March 31, 2001................. $ 52,145,183 $ (8,737,595) $ (611,219) $47,091,523
=========== =========== ========== ==========
See notes to consolidated financial statements.
7
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2001 and 2000
(Unaudited)
NOTE A - Basis of Presentation
- ------------------------------
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to rules and regulations of the
Securities and Exchange Commission; however, the Company believes the
disclosures which are made are adequate to make the information presented not
misleading. The financial statements and footnotes included in this Form 10-Q
should be read in conjunction with the financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended December
31, 2000.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position of the
Company as of March 31, 2001 and the results of its operations for the three
months ended March 31, 2001 and 2000.
The results of operations for the three-month period ended March 31, 2001
are not necessarily indicative of the results to be expected for the full year.
NOTE B - New Accounting Pronouncements
- --------------------------------------
On January 1, 2001, the Company adopted Statement of Financial Accounting
Standard No. 133 (subsequently amended by Financial Accounting Standard No.
138), Accounting for Derivative Instruments and Hedging Activities ("FAS 133").
This statement requires all derivatives to be recognized on the balance sheet
and measured at fair value. All such instruments have been designated by the
Company as hedges of forecasted cash flow exposures. Changes in the fair value
of qualifying cash flow hedging derivatives are deferred and recorded as a
component of Accumulated Other Comprehensive Income (AOCI) in the Consolidated
Balance Sheet until the forecasted transaction occurs, at which time the
derivative's fair value will be recognized in earnings. The ineffective portion
of a derivative's change in fair value is required to be immediately recognized
in earnings.
Adoption of SFAS Nos. 133/138 resulted in a transition adjustment loss to
AOCI of $2.5 million, net of $1.4 million in income tax benefit, in the first
quarter of 2001 for the cumulative effect on prior years; there was no
cumulative effect on earnings upon adoption. Excluding the transition
adjustment, the effect of this accounting change increased AOCI for the three
months ended March 31, 2001 by $1,924,000, net of $1,036,000 in income taxes,
and decreased income for the same period by $200,000, net of $107,000 in taxes,
$0.01 per share. The deferred hedging loss included in AOCI will be transferred
to earnings as the forecasted transactions actually occur. The $611,000 balance
in AOCI, is anticipated to be transferred into earnings over the next nine
months.
8
NOTE C - Public Offering
- ------------------------
On February 1, 2001, the Company completed a public offering of 3,000,000
shares of its common stock at $5.00 per share resulting in net proceeds of
approximately $13.1 million to the Company. The Company used the proceeds from
the offering along with other available funds to reduce outstanding debt under
its credit facility by approximately $13.7 million. Transactions costs totaling
$303,000 were accounted for as deferred costs at December 31, 2000.
NOTE D - Exchange of Series B Preferred Stock
- ---------------------------------------------
Prior to the public offering, the Company reached an agreement with all of
the holders of its Series B preferred stock to exchange each share of Series B
for 1.8 shares of its common stock. Concurrent with the closing of the public
offering, the Company exchanged all 660,839 shares of its Series B preferred
stock into 1,189,510 shares of common stock. In connection with the conversion
of the Series B preferred stock, a conversion premium in the amount of
$2,377,000 was recorded to reflect the excess of the 1.8 conversion factor over
the terms of the original preferred stock issuance. This one-time, non-cash
charge is reflected as a preferred stock dividend to arrive at net income
applicable to common stock and will not have an affect on total stockholders
equity. Transactions costs of $105,000 accounted for as deferred costs at
December 31, 2000 were netted against additional paid-in capital at the date of
conversion.
NOTE E - Loss Per Share
- -----------------------
Net loss was used as the numerator in computing basic loss per common share
for the three months ended March 31, 2001 and 2000. The computations of loss per
share in the consolidated Statements of Income did not consider stock warrants
convertible into 2,721,831 shares of common stock, convertible preferred stock
convertible into 330,013 shares of common stock and stock options convertible
into 167,564 shares of common stock for the three months ended March 31, 2001
because the effects of these convertible securities would have been
antidilutive. No potential common stock amounts have been included in the
computation of diluted per share for the three months ended March 31, 2000
period because to do so would have been antidilutive.
NOTE F - Commitments and Contingencies
- --------------------------------------
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 Company has estimated that the remaining cost of long-term
clean-up of the site will be approximately $4.5 million with the Company's
percentage of responsibility to be approximately 3.05%. As of March 31, 2001,
the Company has paid approximately $321,000 in costs related to this matter and
$122,500 accrued 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-term clean-up of the site.
9
There can be no assurance that the cost of clean-up and the Company's percentage
responsibility will not be higher than currently 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 clean
up to the Company could be significantly higher than the amount presently
estimated or accrued for this liability.
NOTE G - Income Taxes
- ---------------------
No provision for income taxes was recorded by the Company for the three
months ended March 31, 2000 due to its incurring a net operating loss for the
period. A valuation allowance was provided for the amount of net operating loss
carryforwards generated.
10
Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Changes in Results of Operations
- --------------------------------
Three months ended March 31, 2001 versus three months ended March 31,2000
Total revenues for the three months ended March 31, 2001 amounted to
$9,406,000 and were $4,732,000 higher than the $4,674,000 for the three months
ended March 31, 2000 due to higher oil and gas sales. Oil and natural gas sales
were $4,862,000 higher due primarily to increased production volumes and
significantly higher gas prices for the current period, compared to the same
period in 2000. Oil and gas sales were reduced by $1,213,000 in the three months
ended March 2001 compared to a reduction of $485,000 in the three months ended
March 2000, as a result of the settlement of the Company's outstanding futures
contracts.
The following table reflects the production volumes and pricing information
for the periods presented.
Three months Three months
ended March 31, 2001 ended March 31, 2000
-------------------- --------------------
Production Average Price Production Average Price
---------- ------------- ---------- -------------
Gas (Mcf)............. 876,877 $ 6.74 711,822 $ 2.58
Oil (Bbls)............ 132,874 25.92 109,744 24.18
Lease operating expense and production taxes were $2,042,000 for the three
months ended March 31, 2001, versus $1,341,000 for the three months ended March
31, 2000 due to higher oil and gas sales and a full three months of costs at
Burrwood/West Delta 83 Field in the current period, compared to one month in the
prior period. Depletion, depreciation and amortization was $1,535,000 for the
three months ended March 31, 2001 versus $1,304,000 for the three months ended
March 31, 2000, or $231,000 higher due primarily to higher production volumes in
the three months ended March 31, 2001. Exploration expense in the first quarter
of 2001 was $1,057,000 versus $361,000 in the first quarter of 2000, or $696,000
higher due primarily to 3-D seismic costs and dry hole costs of $403,000 and
$292,000 respectively, in the first quarter of 2001 compared to none in the same
period of 2000.
Interest expense was $371,000 in the three months ended March 31, 2001
compared to $1,182,000 in the first quarter of 2000 due to the Company having a
lower effective interest rate and lower average debt outstanding due to the
conversion of notes payable from the September 1999 private placement and
repayment of approximately $13,690,000 in debt with Compass Bank. The 2000
amount includes non-cash expenses associated with the amortization of financing
costs and detachable common stock purchase warrants issued in connection with
the September 1999 private placement of $111,000 and $142,500, respectively.
11
General and administrative expenses amounted to $625,000 in the three
months ended March 31, 2001 versus $479,000 in the first quarter of 2000.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities was $5,906,000 in the three
months ended March 31, 2001 compared to $243,000 in the three months ended March
31, 2000. The Company's accompanying Consolidated Statements of Cash Flows
identify major differences between net income and net cash provided by operating
activities for each of the periods presented.
Net cash used in investing activities totaled $5,778,000 for the first
quarter of 2001 compared to $2,177,000 in 2000. The three months ended March 31,
2001 consists of capital expenditures of $6,196,000 and proceeds from the sale
of oil field equipment and oil and gas properties of $380,000 and $38,000,
respectively. The three months ended March 31, 2000 reflects cash paid in
connection with the acquisition of oil and gas properties of $1,199,000, and
capital expenditures totaling $1,105,000 and proceeds from the sale of oil and
gas properties of $126,000.
Net cash used by financing activities was $892,000 for the current period
as compared to net cash provided by financing activities of $2,392,000 in 2000.
The 2001 amount consists of proceeds from the issuance of common stock of
$15,000,000 and pay downs by the Company under its line of credit of
$13,690,000. The 2001 amount also includes the payment of debt financing and
public offering costs of $1,695,000, changes in restricted cash of $210,000, and
production payments of $149,000. In addition, the 2001 amount includes preferred
stock dividends of $158,000 and proceeds from the exercise of employee stock
options of $12,000. The 2000 amount includes proceeds from the issuance of
common stock of $4,500,000 and pay downs by the Company under its line of credit
of $1,025,000. The 2000 amount includes changes in restricted cash of
$1,250,000, production payments of $31,000 and debt financing costs of $30,000.
In addition, the 2000 amount includes proceeds from the exercise of stock
options and warrants of $227,000.
Compass Credit Facility
- -----------------------
On January 31, 2001, the Company amended its Credit Agreement with Compass
Bank and Bank One. The amended credit facility provided for an initial borrowing
base, as determined in September 2000, of $30,000,000, subject to semi-annual
redeterminations each April and October based on a review of the Company's
reserves. As of March 31, 2001 the borrowing base was $22,250,000 and will
reduce by $1,550,000 in April 2001, and by $550,000 per calendar month until the
borrowing base redetermination is concluded. The Company and the banks are
currently conducting a borrowing base review pursuant to the Credit Agreement.
The Company has submitted and the banks are currently reviewing additional
reserves not included in the existing borrowing base. The Company anticipates
the review process to be concluded and a new borrowing base established in June
2001. Interest on the credit facility will accrue at a rate calculated at the
12
option of the Company as either the Compass Bank prime rate, or LIBOR plus 1.75%
- - 2.00% depending on borrowing base utilization. Interest is payable monthly.
The credit facility will mature on April 1, 2003. The credit facility requires
that the Company pay a commitment fee each quarter based on the Company's
borrowing base utilization. The fee is equal to 0.375% to 0.50% per annum based
on the borrowing base utilization. Prior to maturity, no payments are required
so long as the maximum borrowing base amount exceeds the amounts outstanding
under the credit facility. The credit facility requires the Company to monitor
tangible net worth and maintain certain financial statement ratios at certain
levels and restricts the Company from declaring or paying dividends on its
common stock without the lenders consent. Substantially all the Company's assets
are pledged to secure the credit facility.
Additionally, the Company has a $1 million letter of credit facility in
place with Compass Bank that expires in April 2003. There were no outstanding
letters of credit as of March 31, 2001.
The Company had $6,200,000 in capital expenditures in the three months
ended March 31, 2001. The Company's budget for 2001 capital expenditures was set
at the beginning of the year at $20,000,000. Such budget is under constant
review during the year and could change due to actual and estimated cash flow,
commodity prices, business opportunities and other factors. The Company expects
to fund capital expenditures for the remainder of 2000 from operating cash flow,
cash and bank borrowings, if necessary.
Stock Listing
- -------------
The Company is currently below certain of the New York Stock Exchange's
("NYSE's") continued listing criteria. The Company has been trading pursuant to
an approved business plan to return to compliance within a 12-month time frame.
The business plan covered the period through August 2000. The NYSE has
determined to forbear from initiating any formal removal action in view of the
fact that the Company has successfully met one half of the conjunction test
requiring that the Company return to $50 million each in stockholders' equity
and market capitalization and has made substantial progress on meeting the other
component of the test. The Company's market capitalization at May 8, 2001 was in
excess of $100 million and, at March 31, 2001, the Company's stockholder's
equity was approximately $47,000,000. This extension has been made in light of
evidence that the Company has provided a business plan that shows the Company
successfully meeting the $50 million equity requirement, though in a delayed
time frame.
Accounting Matters
- ------------------
As described in Note B of this Form 10-Q report, the Company adopted
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by Statement of Financial
Accounting Standards No. 138 effective January 1, 2001.
13
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
Debt and debt-related derivatives
- ---------------------------------
The Company is exposed to interest rate risk on its long-term debt with
variable interest rates. Based on the overall interest rate exposure on variable
rate debt at March 31, 2001 a hypothetical 2% change in the interest rates would
increase interest expense by approximately $186,000.
Hedging Activity
- ----------------
The Company engages in futures contracts ("Agreements") with certain of its
production. The Company enters into hedging activities in order to secure an
acceptable future price relating to a portion of future production. The primary
objective of the activities is to protect against decreases in price during the
term of the hedge. See Note B to the Company's Consolidated Financial Statements
for a discussion of activities involving derivative financial instruments during
the first quarter of 2001.
At March 31, 2001, the Company's open forward position on its outstanding
crude oil was as follows:
(a) 500 barrels of oil per day with a no cost "collar" of $20.00 and $28.40 per
barrel through December 2001; and
(b) 300 barrels of oil per day with a no cost "collar" of $23.00 and $29.55 per
barrel through December 2001
The fair value of the crude oil hedging contracts in place at March 31,
2001 resulted in a liability of $20,000. A 10% increase in the average NYMEX
price of crude oil would have increased this liability by $81,000 while a 10%
decrease would have had little or no effect on the liability.
At March 31, 2001, the Company had a natural gas hedging contract in place
for 5,000 Mmbtu per day with a no cost collar of $3.05 and $4.45 per Mmbtu
through December 31, 2001. The fair value of the natural gas hedging contract in
place at March 31, 2001 resulted in a liability of $920,000. A 10% increase in
the average NYMEX price of natural gas would have increased this liability by
$679,000, while a 10% decrease would have decreased the liability by a similar
amount.
Price fluctuations and the volatile nature of markets
- -----------------------------------------------------
Despite the measures taken by the Company to attempt to control price risk,
the Company remains subject to price fluctuations for natural gas and oil sold
in the spot market. Prices received for natural gas sold on the spot market are
volatile due primarily to seasonality of demand and other factors beyond the
Company's control. Domestic oil and gas prices could have a material adverse
effect on the Company's financial position, results of operations and quantities
of reserves recoverable on an economic basis.
14
Disclosure Regarding Forward-Looking Statement
- ----------------------------------------------
Certain statements in this quarterly report on Form 10-Q regarding future
expectations and plans for future activities may be regarded as "forward looking
statements" within the meaning of Private Securities Litigation Reform Act of
1995. They are subject to various risks, such as financial market conditions,
operating hazards, drilling risks and the inherent uncertainties in interpreting
engineering data relating to underground accumulations of oil and gas, as well
as other risks discussed in detail in the Company's Annual Report on Form 10-K
and other filings with the Securities and Exchange Commission. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to be correct.
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(b) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements 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.
GOODRICH PETROLEUM CORPORATION
(registrant)
May 15, 2001 /s/ Walter G. Goodrich
- ------------------------------ -----------------------------------------
Date Walter G. Goodrich, President and
Chief Executive Officer
May 15, 2001 /s/ Roland L. Frautschi
- ------------------------------ -----------------------------------------
Date Roland L. Frautschi, Senior Vice
President, Chief Financial Officer
and Treasurer
17