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 September 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
------------------------------------------------------
Goodrich Petroleum Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 76-0466193
- --------------------------------- ------------------------------------------
(State or other jurisdiction of (I.R.S. Employer ID. No.)
incorporation or organization)
815 Walker, 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 November 14, 2001, there were 17,807,662 shares of Goodrich Petroleum
Corporation common stock outstanding.
1
GOODRICH PETROLEUM CORPORATION
FORM 10-Q
September 30, 2001
INDEX
Page No.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
September 30, 2001 (Unaudited) and December 31, 2000.............. 3-4
Consolidated Statements of Operations (Unaudited)
Nine Months Ended September 30, 2001 and 2000..................... 5
Three Months Ended September 30, 2001 and 2000.................... 6
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2001 and 2000..................... 7
Consolidated Statements of Stockholders' Equity and
Comprehensive Income (Unaudited)
Nine Months Ended September 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 Disclosure about Market Risk 16-17
PART II - OTHER INFORMATION 18
Item 2. Changes in Securities and Use of Proceeds.
Item 6. Exhibits and Reports on Form 8-K
2
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................... $ 127,402 3,531,763
Accounts receivable
Trade and other, net of allowance................ 928,176 241,659
Accrued oil and gas revenue...................... 4,225,939 4,553,863
Fair value of oil and gas derivatives............ 502,699 ---
Prepaid insurance.................................. 111,640 238,647
----------- -----------
Total current assets.......................... 5,895,856 8,565,932
----------- -----------
PROPERTY AND EQUIPMENT
Oil and gas properties (successful efforts method). 103,777,721 79,252,980
Furniture, fixtures and equipment.................. 304,010 240,150
----------- -----------
104,081,731 79,493,130
Less accumulated depletion, depreciation
and amortization............................... (31,405,498) (26,044,257)
----------- -----------
Net property and equipment....................... 72,676,233 53,448,873
----------- -----------
OTHER ASSETS
Restricted cash.................................... 2,495,000 1,240,000
Deferred taxes..................................... --- 1,694,675
Other.............................................. 60,310 394,114
----------- -----------
Total other assets............................ 2,555,310 3,328,789
----------- -----------
TOTAL ASSETS............................. $ 81,127,399 65,343,594
=========== ===========
See notes to consolidated financial statements.
3
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................. $ 3,854,238 $ 3,043,477
Accrued liabilities............................... 1,864,453 1,231,965
Current portion other non-current liabilities..... 124,875 820,454
----------- ------------
Total current liabilities............... 5,843,566 5,095,896
----------- ------------
LONG TERM DEBT...................................... 19,000,000 22,965,000
OTHER NON-CURRENT LIABILITIES
Production payment payable........................ 1,385,687 969,870
Accrued abandonment costs......................... 4,129,741 3,707,612
Deferred Taxes.................................... 831,294 ---
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 17,773,060 and 13,318,920 shares.. 3,554,612 2,663,784
Additional paid-in capital...................... 52,303,990 39,348,013
Accumulated deficit............................. (7,040,213) (10,859,388)
Accumulated other comprehensive income.......... 326,754 ---
----------- -----------
Total stockholders' equity........... 49,937,111 32,605,216
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..... $ 81,127,399 $ 65,343,594
=========== ===========
See notes to consolidated financial statements.
4
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Nine Months Ended
September 30,
2001 2000
---------- -----------
REVENUES
Oil and gas sales..................................$ 24,029,405 19,656,078
Other.............................................. 154,208 382,229
---------- -----------
Total revenues................................ 24,183,613 20,038,307
---------- -----------
EXPENSES
Lease operating expense............................ 4,733,427 3,416,725
Production taxes................................... 1,457,000 1,584,138
Depletion, depreciation and amortization........... 5,038,843 4,227,460
Exploration........................................ 3,253,732 2,084,469
Interest expense................................... 918,809 3,696,048
General and administrative......................... 2,252,700 1,711,525
Preferred dividend requirements of a subsidiary.... --- 38,364
---------- -----------
Total costs and expenses...................... 17,654,511 16,758,729
---------- -----------
GAIN ON SALE OF ASSETS................................ 71,986 307,299
---------- -----------
INCOME BEFORE INCOME TAXES............................ 6,601,088 3,586,877
Income taxes....................................... (2,310,381) 1,655,032
---------- -----------
NET INCOME............................................ 4,290,707 5,241,909
Preferred stock dividends.......................... 2,848,073 886,685
---------- -----------
NET INCOME APPLICABLE TO COMMON STOCK................. 1,442,634 4,355,224
========== ===========
BASIC INCOME PER AVERAGE COMMON SHARE................. .08 .49
========== ===========
DILUTED INCOME PER AVERAGE COMMON SHARE............... .07 .35
========== ===========
AVERAGE COMMON SHARES OUTSTANDING - BASIC............. 17,167,718 8,873,159
========== ===========
AVERAGE COMMON SHARES OUTSTANDING - DILUTED........... 20,099,393 15,050,900
========== ===========
See notes to consolidated financial statements.
5
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30,
2001 2000
------------- ----------
REVENUES
Oil and gas sales..............................$ 7,678,211 8,590,027
Other ........................................ 70,241 96,349
---------- -----------
Total revenues............................ 7,748,452 8,686,376
---------- -----------
EXPENSES
Lease operating expense........................ 1,655,790 1,305,170
Production taxes............................... 442,285 651,126
Depletion, depreciation and amortization....... 1,881,258 1,659,354
Exploration.................................... 537,276 1,358,282
Interest expense............................... 321,571 1,304,055
General and administrative..................... 811,899 514,268
---------- -----------
Total costs and expenses.................. 5,650,079 6,792,255
---------- -----------
GAIN ON SALE OF ASSETS............................ --- 33,475
---------- -----------
INCOME BEFORE INCOME TAXES........................ 2,098,373 1,927,596
Income taxes................................... (734,432) 1,655,032
---------- -----------
NET INCOME....................................... 1,363,941 3,582,628
Preferred stock dividends...................... 154,798 295,562
---------- -----------
NET INCOME APPLICABLE TO COMMON STOCK............. 1,209,143 3,287,066
========== ===========
BASIC INCOME PER AVERAGE COMMON SHARE............. .07 .31
========== ===========
DILUTED INCOME PER AVERAGE COMMON SHARE........... .06 .23
========== ===========
AVERAGE COMMON SHARES OUTSTANDING - BASIC......... 17,763,136 10,644,423
========== ===========
AVERAGE COMMON SHARES OUTSTANDING - DILUTED....... 20,610,805 15,505,616
========== ===========
See notes to consolidated financial statements.
6
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2001 2000
---------- ----------
OPERATING ACTIVITIES
Net income.........................................$ 4,290,707 $ 5,241,909
Adjustments to reconcile net income to cash
provided by operating activities:
Depletion, depreciation and amortization......... 5,038,843 4,227,460
Deferred income taxes............................ 2,310,381 (1,655,032)
Amortization of leasehold costs.................. 769,402 762,914
Amortization of production payment discount...... 92,931 177,999
Amortization of deferred debt financing.......... 39,750 300,292
Accrued interest on private placement borrowings. --- 973,631
Amortization of detachable stock purchase
warrants.................................... --- 357,016
Preferred dividends of subsidiary................ --- 38,364
Gain on sale of assets........................... (71,986) (307,299)
Capital expenditures charged to income........... 1,566,736 954,640
Other............................................ 20,745 30,000
Net change in:
Accounts receivable.............................. (358,593) (3,296,961)
Prepaid insurance and other...................... 99,452 (107,103)
Accounts payable................................. 810,761 2,321,635
Accrued liabilities.............................. 252,488 (55,133)
Other liabilities................................ --- (484,525)
----------- -----------
Net cash provided by operating activities... 14,861,617 9,479,807
----------- -----------
INVESTING ACTIVITIES
Proceeds from sale of assets....................... 451,986 459,526
Acquisition of oil and gas properties.............. --- (1,198,631)
Capital expenditures............................... (26,155,337) (10,783,174)
----------- -----------
Net cash used in investing activities....... (25,703,351) (11,522,279)
----------- -----------
FINANCING ACTIVITIES
Proceeds from public offering of common stock...... 15,000,000 4,500,000
Principal payments of bank borrowings.............. (13,690,000) (3,225,617)
Proceeds from bank borrowings...................... 9,725,000 ---
Payment of debt and equity financing costs......... (1,695,323) (30,000)
Exercise of stock purchase warrants................ 210,233 249,322
Exercise of stock options.......................... 11,563 201,319
Net change in restricted cash...................... (1,255,000) (1,030,000)
Production payments................................ (397,568) (452,733)
Preferred stock dividends.......................... (471,532) (2,068,652)
----------- -----------
Net cash provided by financing activities... 7,437,373 (1,856,361)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS............. (3,404,361) (3,898,833)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...... 3,531,763 5,929,833
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............$ 127,402 $ 2,030,396
=========== ===========
See notes to consolidated financial statements.
7
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Nine Months Ended September 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 .............................. --- --- --- --- 1,547,665 309,533
Exercise of Director Stock Option......... --- --- --- --- 12,500 2,500
Conversion of Notes Payable and Issuance
of Common Stock in Connection therewith.. --- --- --- --- 3,295,647 ---
Preferred Stock Dividends................. --- --- --- --- --- ---
Exercise of Common Stock Purchase Warrants --- --- --- --- 252,022 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.......................... --- --- (4,920) (4,920) 5,486 682
------- -------- -------- ------- ---------- ---------
Balance at September 30, 2000............. 796,318 $ 796,318 660,839 $ 660,839 12,315,522 $ 2,463,104
======= ======== ======== ======= ========== =========
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................ --- --- --- --- 252,000 50,400
Exercise of Stock Options................. --- --- --- --- 7,500 1,500
------- -------- -------- ------- ---------- ---------
Balance at September 30, 2001............. 791,968 $ 791,968 --- $ --- 17,773,060 $ 3,554,612
======= ======== ======== ======= ========== =========
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Nine Months Ended September 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................................ --- 5,241,909 --- 5,241,909
Total Comprehensive Income................ --- --- --- 5,241,909
Issuance of Common Stock.................. 4,193,333 --- --- 4,500,000
Conversion of Preferred Stock of
Subsidiary.............................. 2,411,956 --- --- 2,721,489
Exercise of Director Stock Option......... 7,375 --- --- 9,875
Conversion of Notes Payable and Issuance
of Common Stock in Connection therewith.. --- --- --- 10,410,849
Preferred Stock Dividends................. --- (2,068,652) --- (2,068,652)
Exercise of Common Stock Purchase Warrants 173,509 --- --- 249,322
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 September 30, 2000............. $ 34,894,343 $(11,117,324) $ --- $ 27,697,280
========== =========== ========== ==========
Balance at December 31, 2000.............. 39,348,013 (10,859,388) --- 32,605,216
Net Income................................ --- 4,290,707 --- 4,290,707
Other Comprehensive Income (Loss);
Net of Tax
Cumulative Effect of Accounting Change.... --- --- (2,535,469) (2,535,469)
Net Derivative Gain....................... --- --- 2,041,626 2,041,626
Reclassification Adjustment............... --- --- 820,597 820,597
Total Comprehensive Income................ --- --- --- 4,617,461
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................. --- (471,532) --- (471,532)
Director Stock Grant...................... 28,974 --- --- 30,000
Exercise of Stock Warrants................ 129,833 --- --- 180,233
Exercise of Stock Options................. 10,063 --- --- 11,563
---------- ---------- ---------- ----------
Balance at September 30, 2001............. $ 52,303,990 $ (7,040,213) $ 326,754 $49,937,111
=========== =========== ========== ==========
See notes to consolidated financial statements.
8
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
(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 September 30, 2001 and the results of its operations for the three
and nine months ended September 30, 2001 and 2000.
The results of operations for the three and nine months period ended
September 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 nine months ended September 30,
2001 by $2,862,000, net of $1,541,000 in income taxes, and had no impact on
income for the same period. The deferred hedging gain included in AOCI will be
9
transferred to earnings as the forecasted transactions actually occur. The
$340,000 balance in AOCI, is anticipated to be transferred into earnings over
the next five 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 nine months ended September 30, 2001
and 2000. The following table reconciles the weighted-average shares outstanding
used for these computations.
Three months Nine months
ended September 30, ended September 30,
------------------- -------------------
2000 2001 2000 2001
---- ---- ---- ----
Basic Method............. 10,644,423 17,763,136 8,873,159 17,167,718
Dilutive Stock Warrants.. 2,744,955 2,728,026 2,757,535 2,760,321
Dilutive Stock Options... 396,770 119,643 653,787 171,354
----------- ---------- ---------- ----------
Diluted Method........... 13,786,148 20,610,805 12,284,481 20,099,393
=========== ========== =========== ==========
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 nine months ended September 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 September 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
- ---------------------
The Company recorded a net deferred tax asset of approximately $1.6 million
in the three months ended September 30, 2000 based on projections for generating
sufficient taxable income prior to expiration of net operating loss
carryforwards. Although realization is not assured, management believes it is
more likely than not that the recorded deferred tax asset, net of valuation
allowance provided, will be realized.
NOTE H - Credit Facility
- ------------------------
On November 9, 2001 the Company established a new credit facility with BNP
Paribas Bank, with a borrowing base of $25,000,000. The new borrowing base will
remain effective until the next borrowing base redetermination scheduled to be
made on or before March 31, 2002. Interest on the credit facility will accrue at
a rate calculated at the option of the Company as either the BNP Paribas Bank
base rate plus 0.00% to 0.50%, or LIBOR plus 1.50% - 2.50% depending on
borrowing base utilization. Interest or LIBOR-Rate is due and payable on the
last day of its respective Interest Period. Accrued interest on each Base-Rate
borrowing is due and payable on the last day of each quarter. The credit
facility will mature on November 9, 2004. The credit facility requires that the
Company pay a 0.375% per annum commitment fee each quarter based on the
Company's 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. 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
-----------------------------------
Nine months ended September 30, 2001 versus nine months ended September 30, 2000
Total revenues for the nine months ended September 30, 2001 amounted to
$24,184,000 and were $4,145,000 higher than the $20,038,000 for the nine months
ended September 30, 2000 due to higher oil and gas sales. Oil and gas sales were
$24,029,000 for the first nine months of 2001 compared to $19,656,000 for the
first nine months of 2000, or $4,373,000 higher due to increased production
volumes and higher oil and gas prices. Oil and gas sales decreased by $1,256,000
in the nine months ended September 30, 2001 compared to a reduction of
$1,763,000 in the prior period as a result of settlement of the Company's
outstanding futures contracts.
The following table reflects the production volumes and pricing information
for the periods presented.
Nine months Nine months
ended September 30, 2001 ended September 30, 2000
------------------------ ------------------------
Production Average Price Production Average Price
Gas (Mcf)....... 2,785,221 $ 4.55 2,453,378 $ 3.57
Oil (Bbls)...... 436,088 26.07 435,607 25.02
Lease operating expense was $4,733,000 for the nine months ended September
30, 2001, versus $3,417,000 for the nine months ended September 30, 2000, or
$1,316,000 higher due primarily to a full nine months of costs at Burrwood/West
Delta 83 field in the current period compared to seven months in the prior
period. Production taxes amounted to $1,457,000 for the nine months ended
September 30, 2001 compared to $1,584,000 or $127,000 lower due to higher oil
and gas sales more than offset by severance tax exemptions received on certain
production in the Burrwood/West Delta 83 field. Depletion, depreciation and
amortization was $5,039,000 for the nine months ended September 30, 2001, versus
$4,227,000 for the nine months ended September 30, 2000, or $812,000 higher due
to increased capitalized costs and higher production volumes in the nine months
ended 2001 versus 2000.
Exploration expense for the nine months ended September 30, 2001 was
$3,254,000 versus $2,084,000 for the same period of 2000 or $1,170,000 higher
due primarily to dry hole and seismic costs of $1,567,000, and $532,000,
respectively, in the current period versus $-0- and $796,000 for the same period
in 2000.
Interest expense was $919,000 in the nine months ended September 30, 2001
compared to $3,696,000 in the nine months ended September 30, 2000, or
$2,777,000 lower due to higher average debt outstanding for the nine months
ended September 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 $2,253,000 in the nine
months ended September 30, 2001 versus $1,711,000 in the nine months ended
September 30, 2000.
The Company recorded a gain on the sale of certain non-core oil and gas
properties of $72,000 for the nine months ended September 30, 2001.
Three months ended September 30, 2001 versus three months
ended September 30, 2000
Total revenues for the three months ended September 30, 2001 amounted to
$7,748,000 and were $938,000 lower than the $8,686,000 for the three months
ended September 30, 2000 due to lower oil and gas sales. Oil and gas sales were
$7,678,000 for the quarter ended September 30, 2001 compared to $8,590,000 for
the quarter ended September 30, 2000 or $912,000 lower due to lower oil and gas
prices and lower oil production partially offset by higher gas production in the
current period. Oil and gas sales were increased by $198,000 in the three months
ended September 30, 2000 versus a reduction of $725,000 in the same period in
2000 as a result of 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 September 30, 2001 ended September 30, 2000
------------------------ ------------------------
Production Average Price Production Average Price
Gas (Mcf)......... 1,088,781 $ 3.17 964,317 $ 4.17
Oil (Bbls)........ 166,087 25.44 173,582 26.33
Lease operating expense was $1,656,000 for the three months ended September
30, 2001, versus $1,305,000 for the three months ended September 30, 2000, or
$351,000 higher due primarily to more producing wells in the 2001 period
compared to the same period in 2000. Production taxes were $442,000 for the
three months ended September 30, 2001 compared to $651,000 for the three months
ended September 30, 2000 or $209,000 lower due to lower oil and gas sales and
receipt of severance tax exemption on certain production in the Burrwood/West
Delta 83 fields. Depletion, depreciation and amortization was $1,881,000 for the
three months ended September 30, 2001, versus $1,659,000 for the three months
ended September 30, 2000, or $222,000 higher due to increased capitalized costs
and higher production volumes in the current period compared to the prior
period.
The Company incurred $537,000 of exploration expense in the third quarter
of 2001, compared to $1,358,000 in the third quarter of 2000, or $821,000 lower
primarily due to seismic costs of $66,000 in the third quarter of 2001 versus
$792,000 in 2000. Additionally, dry hole costs amounted to $24,000 in the third
quarter of 2001 compared to $158,000 for the same period in 2000.
Interest expense was $322,000 in the three months ended September 30, 2001
compared to $1,304,000 in the third quarter of 2000, or $982,000 lower due to
higher average debt outstanding and a higher effective interest rate in the 2000
13
period. Also, the 2000 amount includes $203,000 in 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 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 $812,000 in the three
months ended September 30, 2001 versus $514,000 in the third quarter of 2000.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities was $14,862,000 in the nine
months ended September 30, 2001 compared to net cash provided by operating
activities of $9,480,000 in the nine months ended September 30, 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 $25,703,000 for the nine
months ended September 30, 2001 compared to $11,522,000 in 2000. The nine months
ended September 30, 2001 reflects capital expenditures totaling $26,155,000 and
proceeds from the sale of oil and gas properties of $452,000. The nine months
ended September 30, 2000 reflects capital expenditures totaling $10,783,000,
cash paid in connection with the acquisition of oil and gas properties of
$1,199,000, and proceeds from the sales of oil and gas properties of $460,000.
Net cash provided by financing activities was $7,437,000 for the nine
months ended September 30, 2001 as compared to net cash used in financing
activities of $1,856,000 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 $9,725,000, the payment of debt financing and
public offering costs of $1,695,000, changes in restricted cash of $1,255,000,
and production payments of $398,000. In addition, the 2001 amount includes
preferred stock dividends of $472,000 and proceeds from the exercise of stock
warrants and employee stock options of $210,000 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 $3,226,000. The 2000
amount includes changes in restricted cash of $1,030,000, proceeds from the
exercise of stock purchase warrants of $249,000 and the exercise of employee
stock options of $201,000. The 2000 amount also includes preferred stock
dividends of $2,069,000, production payments of $453,000 and payment of debt
financing costs of $30,000.
Compass Credit Facility
- -----------------------
On November 9, 2001 the Company established a new credit facility with BNP
Paribas Bank, with a borrowing base of $25,000,000. The new borrowing base will
remain effective until the next borrowing base redetermination scheduled to be
14
made on or before March 31, 2002. Interest on the credit facility will accrue at
a rate calculated at the option of the Company as either the BNP Paribas Bank
base rate plus 0.00% to 0.50%, or LIBOR plus 1.50% - 2.50% depending on
borrowing base utilization. Interest on LIBOR-Rate loans is due and payable on
the last day of its respective Interest Period. Interest on each Base-Rate
borrowing is due and payable on the last day of each quarter. The credit
facility will mature on November 9, 2004. The credit facility requires that the
Company pay a 0.375% per annum commitment fee each quarter based on the
Company's 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. Substantially all the Company's assets are pledged to secure the
credit facility.
The Company had $26,155,000 in capital expenditures in the nine months
ended September 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 September 30, 2001 a hypothetical 2% change in the interest rates
would increase interest expense by approximately $90,000.
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 third quarter of 2001.
At September 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 through December
2001;
(d) 300 barrels of oil per day "put" at $25.38 per barrel for January 2002; and
(e) 300 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 September 30,
2001 resulted in an asset of $279,000. A 10% increase in the average NYMEX price
of crude oil would have resulted in an asset of $134,000 and would have
decreased the asset by $145,000.
At September 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 September 30, 2001 resulted in an asset of $224,000. A 10% increase in
the average NYMEX price of natural gas would have resulted in an asset of
$106,000 and would have decreased the asset by $118,000.
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 2. Changes in Securities and Use of Proceeds.
Information required by this item is hereby incorporated by reference
to the Company's Form 8-K filed October 15, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
18
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
19