UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2001
-----------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------------- --------------------
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 incorporation (I.R.S. Employer ID. No.)
or organization)
815 Walker Street, Suite 1040, Houston, Texas 77002
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(713) 780-9494
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
None
- --------------------------------------------------------------------------------
(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 August 13, 2001, there were 17,850,816 shares of Goodrich Petroleum
Corporation common stock outstanding.
1
GOODRICH PETROLEUM CORPORATION
FORM 10-Q
June 30, 2001
INDEX
Page No.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
June 30, 2001 (Unaudited) and December 31, 2000.................. 3-4
Consolidated Statements of Operations (Unaudited)
Six Months Ended June 30, 2001 and 2000.......................... 5
Three Months Ended June 30, 2001 and 2000........................ 6
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2001 and 2000.......................... 7
Consolidated Statements of Stockholders' Equity (Unaudited)
Six Months Ended June 30, 2001 and 2000.......................... 8
Notes to Consolidated Financial Statements.......................... 9-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 12-16
Item 3. Quantitative and Qualitative Disclosures about Market Risk.. 16-17
PART II - OTHER INFORMATION 18-20
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
June 30, December 31,
2001 2000
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents...........................$ 1,288,769 3,531,763
Accounts receivable
Trade and other, net of allowance.................. 877,703 241,659
Accrued oil and gas revenue........................ 4,327,035 4,553,863
Derivative receivable.............................. 211,227 ---
Prepaid insurance................................... 127,390 238,647
------------ -----------
Total current assets............................ 6,832,124 8,565,932
------------ -----------
PROPERTY AND EQUIPMENT
Oil and gas properties (successful efforts method).. 95,974,283 79,252,980
Furniture, fixtures and equipment................... 285,410 240,150
------------ -----------
96,259,693 79,493,130
Less accumulated depletion, depreciation and
amortization..................................... (29,415,388) (26,044,257)
------------ -----------
Net property and equipment......................... 66,844,305 53,448,873
------------ -----------
OTHER ASSETS
Restricted cash..................................... 2,310,000 1,240,000
Deferred taxes...................................... 40,153 1,694,675
Other............................................... 60,310 394,114
------------ -----------
Total other assets.............................. 2,410,463 3,328,789
------------ -----------
TOTAL ASSETS...............................$ 76,086,892 65,343,594
============ ===========
See notes to consolidated financial statements.
3
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
June 30, December 31,
2001 2000
------------- ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable..................................$ 4,126,128 $ 3,043,477
Accrued liabilities............................... 1,904,805 1,231,965
Current portion other non-current liabilities..... 581,908 820,454
----------- -----------
Total current liabilities............... 6,612,841 5,095,896
----------- -----------
LONG TERM DEBT...................................... 16,025,000 22,965,000
OTHER NON-CURRENT LIABILITIES
Production payment payable........................ 997,542 969,870
Accrued abandonment costs......................... 3,988,407 3,707,612
STOCKHOLDERS' EQUITY
Preferred stock; authorized 10,000,000 shares:
Series A convertible preferred stock, par value
per share; issued and outstanding 791,968 and
791,968 shares (liquidation preference $10 per
share, aggregating to $7,919,680).............. 791,968 791,968
Series B convertible preferred stock, par value
per share; issued and outstanding 0
and 660,839 shares............................ --- 660,839
Common stock; par value $0.20 per share:
Authorized 50,000,000 shares; issued and
outstanding 17,707,111 and 13,318,920 shares.. 3,534,502 2,663,784
Additional paid-in capital........................ 52,248,691 39,348,013
Accumulated deficit............................... (8,249,357) (10,859,388)
Accumulated other comprehensive income............ 137,298 ---
----------- -----------
Total stockholders' equity............. 48,463,102 32,605,216
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..$ 76,086,892 $ 65,343,594
=========== ===========
See notes to consolidated financial statements.
4
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Six Months Ended
June 30,
2001 2000
----------- ----------
REVENUES
Oil and gas sales...................................$ 16,351,194 11,066,051
Other............................................... 83,967 285,880
---------- ----------
Total revenues................................. 16,435,161 11,351,931
---------- ----------
EXPENSES
Lease operating expense............................. 3,077,637 2,111,555
Production taxes.................................... 1,014,715 933,012
Depletion, depreciation and amortization............ 3,157,585 2,568,106
Exploration......................................... 2,716,456 726,187
Interest expense.................................... 597,238 2,391,993
General and administrative.......................... 1,440,801 1,197,257
Preferred dividend requirements of a subsidiary..... --- 38,364
---------- ----------
Total costs and expenses....................... 12,004,432 9,966,474
---------- ----------
GAIN ON SALE OF ASSETS................................. 71,986 273,824
---------- ----------
INCOME BEFORE INCOME TAXES............................. 4,502,715 1,659,281
Income taxes........................................ 1,575,950 ---
---------- ----------
NET INCOME............................................ 2,926,765 1,659,281
Preferred stock dividends........................... 2,693,275 603,552
---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK.................. 233,490 1,055,729
========== ==========
BASIC INCOME PER AVERAGE COMMON SHARE.................. .01 .13
========== ==========
DILUTED INCOME PER AVERAGE COMMON SHARE................ .01 .10
========== ==========
AVERAGE COMMON SHARES OUTSTANDING - BASIC.............. 16,865,075 7,972,848
========== ==========
AVERAGE COMMON SHARES OUTSTANDING - DILUTED............ 19,805,422 11,111,691
========== ==========
See notes to consolidated financial statements.
5
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
June 30,
2001 2000
---------- ---------
REVENUES
Oil and gas sales...................................$ 6,999,949 6,577,103
Other ............................................. 336,548 101,038
---------- ----------
Total revenues................................. 7,336,497 6,678,141
---------- ----------
EXPENSES
Lease operating expense............................. 1,590,646 1,119,985
Production taxes.................................... 459,636 583,917
Depletion, depreciation and amortization............ 1,622,408 1,264,343
Exploration......................................... 1,659,740 365,373
Interest expense.................................... 226,715 1,209,555
General and administrative.......................... 816,150 718,242
---------- ----------
Total costs and expenses....................... 6,375,295 5,261,415
---------- ----------
GAIN ON SALE OF ASSETS................................. 33,606 273,261
---------- ----------
INCOME BEFORE INCOME TAXES............................. 994,808 1,689,987
Income taxes........................................ 348,172 ---
---------- ----------
NET INCOME............................................. 646,636 1,689,987
Preferred stock dividends........................... 158,367 295,945
---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK.................. 488,269 1,394,042
========== ==========
BASIC INCOME PER AVERAGE COMMON SHARE.................. .03 .16
========== ==========
DILUTED INCOME PER AVERAGE COMMON SHARE................ .02 .12
========== ==========
AVERAGE COMMON SHARES OUTSTANDING - BASIC.............. 17,609,205 8,892,668
========== ==========
AVERAGE COMMON SHARES OUTSTANDING - DILUTED............ 20,586,448 12,057,286
========== ==========
See notes to consolidated financial statements.
6
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
2001 2000
----------- ----------
OPERATING ACTIVITIES
Net income...........................................$ 2,926,765 $ 1,659,281
Adjustments to reconcile net income to cash
provided by operating activities:
Depletion, depreciation and amortization........... 3,157,585 2,568,106
Deferred income taxes.............................. 1,540,950 ---
Amortization of leasehold costs.................... 493,827 516,130
Amortization of production payment discount........ 63,825 121,410
Amortization of deferred debt financing............ 39,750 226,178
Accrued interest on private placement borrowings... --- 498,286
Amortization of detachable stock purchase warrants. --- 285,000
Preferred dividends of subsidiary.................. --- 38,364
Gain on sale of assets............................. (71,986) (273,824)
Capital expenditures charged to income............. 1,542,830 4,709
Other.............................................. 28,201 30,000
Net change in:
Accounts receivable................................ (409,216) (2,500,280)
Prepaid insurance and other........................ 104,447 27,020
Accounts payable................................... 1,082,651 282,361
Accrued liabilities................................ 264,548 350,396
Other liabilities.................................. --- (484,525)
---------- ----------
Net cash provided by operating activities..... 10,764,177 3,348,612
---------- ----------
INVESTING ACTIVITIES
Proceeds from sale of assets......................... 451,986 426,050
Acquisition of oil and gas properties................ --- (1,198,631)
Capital expenditures................................. (18,309,302) (5,025,809)
---------- ----------
Net cash used in investing activities......... (17,857,316) (5,798,390)
----------- ----------
FINANCING ACTIVITIES
Proceeds from public offering of common stock........ 15,000,000 4,500,000
Principal payments of bank borrowings................ (13,690,000) (1,925,264)
Proceeds from bank borrowings........................ 6,750,000 ---
Payment of debt and equity financing costs........... (1,695,323) (30,000)
Exercise of stock purchase warrants.................. 134,824 217,511
Exercise of stock options............................ 11,563 201,319
Net change in restricted cash........................ (1,070,000) (1,320,000)
Production payments.................................. (274,185) (170,583)
Preferred stock dividends............................ (316,734) ---
----------- ---------
Net cash provided by financing activities..... 4,850,145 1,472,983
----------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS............. (2,242,994) (976,795)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...... 3,531,763 5,929,229
----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............$ 1,288,769 $ 4,952,434
=========== =========
See notes to consolidated financial statements
7
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Six Months Ended June 30, 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 Income................................ --- --- --- --- --- ---
Total Comprehensive Income................ --- --- --- --- --- ---
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
Exercise of Employee Stock Option......... --- --- --- --- 245,698 49,140
Director Stock Grants..................... --- --- --- --- 6,000 1,200
Conversion of Series B Preferred Stock
to Common Stock.......................... --- (3,059) (3,059) --- 3,411 682
------- -------- -------- ------- ---------- ---------
Balance at June 30, 2000.................. 796,318 $ 796,318 662,700 $ 662,700 8,985,789 $ 1,797,158
======= ======== ======== ======= ========== =========
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................. --- --- --- --- --- ---
Director Stock Grant...................... --- --- --- --- 5,130 1,026
Exercise of Stock Warrants................ --- --- --- --- 156,580 31,316
Exercise of Stock Options................. --- --- --- --- 7,500 1,500
------- -------- -------- ------- ---------- ---------
Balance at June 30, 2001.................. 791,968 $ 791,968 --- $ --- 17,672,510 $ 3,534,502
======= ======== ======== ======= ========== =========
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Six Months Ended June 30, 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 Income................................ --- 1,659,281 --- 1,659,281
Total Comprehensive Income................ --- --- --- 1,659,281
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
Exercise of Employee Stock Option......... 142,304 --- --- 191,444
Director Stock Grants..................... 28,800 --- --- 30,000
Conversion of Series B Preferred Stock
to Common Stock.......................... 2,377 --- --- ---
---------- ----------- ---------- ----------
Balance at June 30, 2000.................. $ 25,115,768 $(12,631,300) $ --- $ 15,740,644
========== =========== ========== ==========
Balance at December 31, 2000.............. 39,348,013 (10,859,388) --- 32,605,216
Net Income................................ --- 2,926,765 --- 2,926,765
Other Comprehensive Income (Loss);
Net of Tax
Cumulative Effect of Accounting Change.... --- --- (2,535,469) (2,535,469)
Net Derivative Gain....................... --- --- 1,722,827 1,722,827
Reclassification Adjustment............... --- --- 949,940 949,940
Total Comprehensive Income................ --- --- --- 3,064,063
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................. --- (316,734) --- (316,734)
Director Stock Grant...................... 28,974 --- --- 30,000
Exercise of Stock Warrants................ 103,508 --- --- 104,824
Exercise of Stock Options................. 10,063 --- --- 11,563
---------- ---------- ---------- ----------
Balance at March 31, 2001................. $ 52,248,691 $ (8,249,357) $ 137,928 $48,463,102
=========== =========== ========== ==========
See notes to consolidated financial statements.
8
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2001 and 2000
(Unaudited)
NOTE A - Basis of Presentation
- ------------------------------
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America 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 June 30, 2001 and the results of its operations for the three and
six months ended June 30, 2001 and 2000.
The results of operations for the three and six months period ended June
30, 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, as of January
1, 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 six months ended June 30, 2001 by
$2,673,000, net of $1,439,000 in income taxes, and had no impact on income for
9
the same period. The deferred hedging gain included in AOCI will be transferred
to earnings as the forecasted transactions actually occur. The $137,000 balance
in AOCI, is anticipated to be transferred into earnings over the next eight
months.
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. Transaction costs paid in
2000 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. Transaction 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 - Net Income Per Share
- -----------------------------
Net income was used as the numerator in computing both basic and diluted
income per common share for the three and six months ended June 30, 2001 and
2000. The following table reconciles the weighted-average shares outstanding
used for these computations.
Three months Six months
ended June 30, ended June 30,
-------------- --------------
2000 2001 2000 2001
---- ---- ---- ----
Basic Method............. 8,892,668 17,609,205 7,972,848 16,865,075
Dilutive Stock Warrants.. 2,822,658 2,697,317 2,641,459 2,745,993
Dilutive Stock Options... 341,960 279,926 497,384 194,354
Diluted Method........... 12,057,286 20,586,448 11,111,691 19,805,422
The computation of earnings per share in the consolidated Statement of
Income did not consider convertible preferred stock convertible into 330,000
shares of common stock for the three and six months ended June 30, 2001 because
the effects of the securities would have been antidilutive.
10
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 June 30, 2001, the
Company has paid approximately $321,000 in costs related to this matter and
$123,000 has been 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.
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 and
six months ended June 30, 2000 due to the availability of net operating loss
carryforwards in the period. A valuation allowance was provided for the amount
of net operating loss carryforwards generated.
NOTE H - Credit Facility
- ------------------------
On July 31, 2001 the Company's borrowing base was redetermined at
$19,000,000 which will remain effective until the next borrowing base
redetermination scheduled for October 2001. Interest on the credit facility will
accrue at a rate calculated at the 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.
11
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Changes in Results of Operations
- --------------------------------
Six months ended June 30, 2001 versus six months ended June 30, 2000
Total revenues for the six months ended June 30, 2001 amounted to
$16,435,000 and were $5,083,000 higher than the $11,352,000 for the six months
ended June 30, 2000 due to higher oil and gas revenues. Oil and gas sales were
$5,285,000 higher due primarily to higher oil and gas prices couple with higher
oil production. Oil and gas sales were reduced by $1,454,000 in the six months
ended June 30, 2001 compared to a reduction of $1,038,000 in the six months
ended June 30, 2000 as a result of settlement of the Company's outstanding
future contracts.
The following table reflects the production volumes and pricing information
for the periods presented.
Six months Six months
ended June 30, 2001 ended June 30, 2000
Production Average Price Production Average Price
Gas (Mcf)....... 1,696,440 $ 5.43 1,489,061 $ 3.18
Oil (Bbls)...... 270,001 26.46 262,025 24.15
Lease operating expense was $3,078,000 for the six months ended June 30,
2001 versus $1,487,000 for the six months ended June 30, 2000 or $1,591,000
higher due primarily to a full six months of costs at Burrwood/West Delta 83
Field in the current period compared to four months in the prior period.
Production taxes amounted to $1,014,000 for the six months ended June 30, 2001
compared to $933,000 for the six months ended June 30, 2000 or $459,000 higher
due primarily to higher oil and gas sales in the current period. Depletion,
depreciation and amortization was $3,198,000 for the six months ended June 30,
2001 versus $2,568,000 for the six months ended June 30, 2000 or $630,000 higher
due primarily to production volumes in the first six months of 2001 versus 2000.
Exploration expense for the six months ended June 30, 2001 was $2,716,000
versus $726,000 for the same period of 2000 or $1,990,000 higher due primarily
to dry hole and seismic expense of $1,543,000 and $466,000 for the six months
ended June 30, 2001 versus $-0- and $5,000 in the same period in 2000.
Interest expense was $597,000 in the six months ended June 30, 2001
compared to $2,392,000 in the six months ended June 30, 2000 due to the Company
having a higher effective interest rate and higher average debt outstanding for
the six months ended June 30, 2000. 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 $226,000 and $285,000.
12
General and administrative expenses amounted to $1,441,000 in the six
months ended June 30, 2001 versus $1,197,000 in the six months ended June 30,
2000.
The Company recorded a gain on the sale of certain non-core oil and gas
properties located in Louisiana and Texas of $72,000 and $274,000 for the six
months ended June 30, 2001 and 2000 respectively.
Three months ended June 30, 2001 versus three months ended June 30,2000
Total revenues for the three months ended June 30, 2001 amounted to
$7,336,000 and were $658,000 higher than the $6,678,000 for the three months
ended June 30, 2000. Oil and gas sales were $423,000 higher due primarily to
higher oil and gas prices and increased gas production partially offset by
decreased oil production. Oil and gas sales were reduced by $241,000 in the
three months ended June 30, 2001 compared to a reduction of $553,000 in the
three months ended June 30, 2000 as a result of the settlement of the Company's
outstanding future contracts.
The following table reflects the production volumes and pricing information
for the periods presented.
Three months Three months
ended June 30, 2001 ended June 30, 2000
------------------- -------------------
Production Average Price Production Average Price
---------- ------------- ---------- -------------
Gas (Mcf).......... 819,563 $ 4.03 777,239 $ 3.74
Oil (Bbls)......... 137,127 26.97 152,281 24.12
Lease operating expense was $1,591,000 for the three months ended June 30,
2001 versus $1,120,000 for the three months ended June 30, 2000 or $471,000
higher due primarily more oil and gas wells in operation in the current period.
Production taxes amounted to $460,000 in the three months ended June 30, 2001
compared to $584,000 for the three months ended June 30, 2000 or $124,000 lower
due to lower effective production tax rates at the Burrwood/West Delta Field.
Depletion, depreciation and amortization was $1,662,000 for the three months
ended June 30, 2001 versus $1,264,000 for the three months ended June 30, 2000
or $398,000 higher than the second quarter of 2000 due to higher gas production
volumes in the second quarter of 2001 versus 2000.
The Company incurred $1,660,000 of exploration expense in the second
quarter of 2001 compared to $365,000 in the second quarter of 2000 or $1,295,000
higher primarily due to dry hole and seismic costs of $1,251,000 and $63,000
respectively in the three months ended June 30, 2001 versus $-0- and $4,000
respectively, in the same period in 2000.
Interest expense was $227,000 in the three months ended June 30, 2001
compared to $1,210,000 in the second quarter of 2000 due to higher average debt
outstanding for the quarter ended June 30, 2000. Also, the 2000 amount includes
$256,000 in non-cash expenses associated with the amortization of financing
13
costs and detachable common stock purchase warrants issued in connection with
the September 1999 private placement and amortization of the discount associated
with the production payment liability recorded in connection with the Lafitte
Field acquisition.
General and administrative expenses amounted to $816,000 in the six months
ended June 30, 2001 versus $718,000 in the second quarter of 2000.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities was $10,764,000 in the six months
ended June 30, 2001 compared to $3,349,000 in the six months ended June 30, 2000
attributable to significantly higher oil and gas revenues. 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 $17,857,000 for the six
months ended June 30, 2001 compared to $5,798,000 in 2000. The six months ended
June 30, 2001 reflects capital expenditures paid totaling $18,309,000 and
proceeds from the sales of oilfield equipment and oil and gas properties of
$380,000 and $72,000 respectively. The six months ended June 30, 2000 reflects
capital expenditures paid totaling $5,026,000, cash paid in connection with the
acquisition of oil and gas properties of $1,199,000, and proceeds from the sale
of oil and gas properties of $426,000.
Net cash provided by financing activities was $4,850,000 for the six months
ended June 30, 2001 as compared to net cash provided by financing activities of
$1,473,000 in the prior year period. The 2001 amounts consist 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 amounts also includes proceeds from
bank borrowings of $6,750,000, the payment of debt financing and public offering
costs of $1,695,000, changes in restricted cash of $1,070,000, and production
payments of $274,000. In addition, the 2001 amount includes preferred stock
dividends of $317,000 and proceeds from the exercise of stock warrants employee
stock options of $135,000 and $12,000; respectively. The 2000 amount includes
proceeds from the issuance of common stock of $4,500,000 and paydowns by the
Company under its line of credit of $1,925,000. The 2000 amount includes changes
in restricted cash of $1,320,000, proceeds from the exercise of stock purchase
warrants of $218,000 and the exercise of employee stock options of $201,000. The
2000 amount also includes production payments of $171,000 and payment of debt
financing costs of $30,000.
Compass Credit Facility
- -----------------------
On July 31, 2001 the borrowing base was redetermined at $19,000,000 which
will remain effective until the next borrowing base redetermination scheduled
for October 2001. Interest on the credit facility will accrue at a rate
calculated at the 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
14
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 other
outstanding letters of credit as of June 30, 2001.
The Company had $18,309,000 in capital expenditures in the six months ended
June 30, 2001. The Company's budget for 2001 capital expenditures was set at the
beginning of the year at $20,000,000, and has since been updated to $26,000,000.
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 2001 from operating cash flow, cash and bank borrowings, if
necessary.
Stock Listing
- -------------
The Company has been notified by the New York Stock Exchange ("NYSE") that
it has been removed from the NYSE's "Watch List" under the Exchange's continued
listing and compliance standards and is now considered a "company in good
standing" as the NYSE rule filing No. SR-NYSE-2001-02 was approved by the
Securities and Exchange Commission on June 27, 2001. The Company will be subject
to the NYSE's normal continued listing requirements and its monitoring process.
New Accounting Pronouncement
- ----------------------------
Statement of Financial Accounting Standards No. 141, "Business
Combinations" ("SFAS No. 141") and Statement of Financial Accounting Standard
No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142") were issued in
July 2001. SFAS No. 141 requires that all business combinations be accounted for
under the purchase method of accounting and that certain acquired intangible
assets in a business combination be recognized and reported as assets apart from
goodwill. SFAS No. 142 requires that amortization of goodwill be replaced with
periodic tests of the goodwill's impairment at least annually in accordance with
the provisions of SFAS No. 142 and that intangible assets other than goodwill be
amortized over their useful lives. The Company will adopt SFAS No. 141
immediately and SFAS No. 142 in the first quarter 2002. The adoption of SFAS No.
141 and 142 are not expected to have a significant impact on the Company's
financial statements.
15
In addition, Statement of Financial Accounting Standard No. 143,
"Accounting for Asset Retirement Obligations" ("SFAS No. 143") has been approved
for issuance. SFAS No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The statement is effective
for fiscal years beginning after June 15, 2001. The Company has not yet
determined what, if any, impact the adoption of this statement may have on its
financial statements.
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 June 30, 2001 a hypothetical 2% change in the interest rates would
increase interest expense by approximately $97,000.
Hedging Activity
The Company engages in future contracts ("Agreements") with some 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 second quarter of 2001.
At June 30, 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;
(b) 300 barrels of oil per day with a no cost "collar" of $23.00 and
$29.55 per barrel through December 2001;
(c) 500 barrels of oil per day "swap" at $29.00 per barrel from July 2001
through December 2001;
(d) 500 barrels of oil per day "put" at $25.38 per barrel for January
2002; and
(e) 500 barrels of oil per day "put" at $25.15 per barrel for February
2002
The fair value of the crude oil hedging contracts in place at June 30, 2001
resulted in an asset of $211,000. A 10% increase in the average NYMEX price of
crude oil would have resulted in a liability of $95,000 would have increased the
asset by $306,000.
At June 30, 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 June 30, 2001 was not significant.
16
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.
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.
17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of the Company was held on May 17, 2001.
Set forth below is a brief description of each matter acted upon at the meeting
and the number of votes cast for, against or withheld, and abstaining or not
voting as to each matter.
Election of Class III Directors
- -------------------------------
FOR WITHHELD
--- --------
Walter G. Goodrich 12,245,181 74,322
Michael Y. McGovern 12,246,297 73,205
Arthur Seeligson 11,586,321 733,182
Ratification of the amendment to the Company's Restated Certificate of
- --------------------------------------------------------------------------------
Incorporation to increase the authorized number of shares of the Company's
- --------------------------------------------------------------------------------
common stock from 25,000,000 to 50,000,000.
- -------------------------------------------
FOR AGAINST WITHHELD
12,206,179 102,458 10,727
Ratification of the amendment to the Company's 1995 Stock Option Plan to
- --------------------------------------------------------------------------------
increase the number of shares of common stock available for issuance from
- --------------------------------------------------------------------------------
1,175,000 to 2,000,000
- ----------------------
FOR AGAINST WITHHELD
--- ------- --------
11,365,789 926,878 26,698
Ratification of the appointment of KPMG LLP as the Company's independent
- --------------------------------------------------------------------------------
auditors for 2001
- -----------------
FOR AGAINST WITHHELD
12,295,484 13,719 10,299
18
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(b) Reports on Form 8-K
None.
19
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)
/s/ Walter G. Goodrich
- ------------------------------ ---------------------------------------------
Date Walter G. Goodrich, President and
Chief Executive Officer
/s/ Roland L. Frautschi
- ------------------------------ ---------------------------------------------
Date Roland L. Frautschi, Senior Vice
President, Chief Financial Officer
and Treasurer
20