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, 1998
------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 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
- ------------------------------------ ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer ID. No.)
incorporation or organization)
5847 San Felipe, Suite 700, Houston, Texas 77057
- --------------------------------------------------------------------------------
(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 6, 1998, there were 5,247,703 shares of Goodrich Petroleum
Corporation common stock outstanding.
1
GOODRICH PETROLEUM CORPORATION
FORM 10-Q
September 30, 1998
INDEX
Page No.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
September 30, 1998 (Unaudited) and December 31, 1997........... 3-4
Consolidated Statements of Operations (Unaudited)
Nine Months Ended September 30, 1998 and 1997.................. 5
Three Months Ended September 30, 1998 and 1997................. 6
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 1998 and 1997.................. 7
Consolidated Statements of Stockholders' Equity (Unaudited)
Nine Months Ended September 30, 1998 and 1997.................. 8
Notes to Consolidated Financial Statements........................ 9-10
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 and Use of Proceeds.
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
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................... $ 321,791 $ 793,358
Marketable equity securities................... 348,150 844,000
Accounts receivable
Trade and other, net of allowance............ 2,549,410 1,354,776
Accrued oil and gas revenue.................. 1,011,417 1,641,969
Prepaid insurance.............................. 162,554 174,201
Other ......................................... --- 4,000
----------- -----------
Total current assets..................... 4,393,322 4,812,304
----------- -----------
PROPERTY AND EQUIPMENT
Oil and gas properties
(successful efforts method).................. 51,486,359 41,154,687
Furniture, fixtures and equipment.............. 195,279 180,966
----------- -----------
51,681,638 41,335,653
Less accumulated depletion, depreciation
and amortization............................. (12,337,031) (8,869,783)
----------- -----------
Net property and equipment............... 39,344,607 32,465,870
----------- -----------
OTHER ASSETS..................................... 269,447 259,744
----------- -----------
TOTAL ASSETS................... $ 44,007,376 $ 37,537,918
=========== ===========
See notes to consolidated financial statements.
3
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................................ $ 6,411,314 $ 1,996,887
Accrued liabilities............................. 2,192,837 2,708,355
---------- ----------
Total current liabilities................. 8,604,151 4,705,242
---------- ----------
LONG TERM DEBT ................................ 28,500,000 18,500,000
STOCKHOLDERS' EQUITY
Preferred stock; authorized 10,000,000 shares:
Series A convertible preferred stock, par
value $1.00 per share; issued and out-
standing 796,318 shares (liquidation
preference $10 per share, aggregating
to $7,963,180)............................. 796,318 796,318
Series B convertible preferred stock, par
value $1.00 per share; issued and out-
standing 750,000 shares (liquidation
preference $10 per share, aggregating
to $7,500,000)............................. 750,000 750,000
Common stock, par value $0.20 per share;
authorized 25,000,000 shares; issued
and outstanding 5,247,703 and
5,232,403 shares........................... 1,049,541 1,046,481
Additional paid-in capital..................... 15,226,027 15,146,095
Accumulated deficit............................ (10,507,211) (3,490,618)
Accumulated other comprehensive income......... (411,450) 84,400
----------- -----------
Total stockholders' equity............... 6,903,225 14,332,676
----------- -----------
TOTAL LIABILITIES AND STOCK-
HOLDERS' EQUITY................... $ 44,007,376 $ 37,537,918
=========== ===========
See notes to consolidated financial statements.
4
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Nine Months Ended
September 30,
1998 1997
-------------------------
REVENUES
Oil and gas sales............................. $ 6,799,520 8,342,881
Pipeline joint venture........................ --- 1,085,167
Other......................................... 600,403 408,389
----------- -----------
Total revenues.......................... 7,399,923 9,836,437
----------- -----------
EXPENSES
Lease operating expense and production taxes.. 1,931,620 1,644,768
Depletion, depreciation and amortization...... 2,959,008 3,850,957
Exploration................................... 5,324,911 1,055,160
Interest expense.............................. 1,345,204 1,065,148
General and administrative.................... 1,914,047 1,703,127
----------- -----------
Total costs and expenses................ 13,474,790 9,319,160
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES............... (6,074,867) 517,277
Income taxes ................................. --- ---
----------- -----------
NET INCOME (LOSS)............................... (6,074,867) 517,277
Preferred stock dividends..................... 941,726 891,308
----------- -----------
LOSS APPLICABLE TO COMMON STOCK................. $ (7,016,593) (374,031)
=========== ===========
BASIC LOSS PER AVERAGE
COMMON SHARE ................................. $ (1.34) (.07)
========== ===========
DILUTED LOSS PER AVERAGE
COMMON SHARE ................................. $ (1.34) (.07)
=========== ===========
AVERAGE COMMON SHARES
OUTSTANDING ................................. 5,241,556 5,228,248
See notes to consolidated financial statements.
5
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30,
1998 1997
--------------------------
REVENUES
Oil and gas sales............................. $ 2,394,436 2,746,693
Pipeline joint venture........................ --- 266,166
Other......................................... 303,307 157,704
------------ ------------
Total revenues.......................... 2,697,743 3,170,563
------------ ------------
EXPENSES
Lease operating expense and production taxes.. 644,306 559,487
Depletion, depreciation and amortization...... 856,740 1,201,028
Exploration................................... 2,153,486 656,122
Interest expense.............................. 541,522 378,952
General and administrative.................... 617,274 613,730
------------ ------------
Total costs and expenses................ 4,813,328 3,409,319
------------ ------------
LOSS BEFORE INCOME TAXES........................ (2,115,585) (238,756)
Income taxes ................................. --- ---
------------ ------------
NET LOSS ..................................... (2,115,585) (238,756)
Preferred stock dividends..................... 313,912 313,891
------------ ------------
LOSS APPLICABLE TO COMMON STOCK................. $ (2,429,497) (552,647)
============ ===========
LOSS PER AVERAGE COMMON SHARE................... $ (.46) (.11)
=========== ===========
AVERAGE COMMON SHARES
OUTSTANDING ................................. 5,247,703 5,232,403
See notes to consolidated financial statements.
6
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months
Ended September 30,
1998 1997
-------------------------
OPERATING ACTIVITIES
Net income (loss).................................. $(6,074,867) 517,277
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depletion, depreciation and amortization....... 2,959,008 3,850,957
Amortization of leasehold costs................ 760,769 192,345
Amortization of deferred debt financing costs.. --- 27,694
Gain on sale of oil and gas properties......... (4,206) (18)
Capital expenditures charged to income......... 4,110,825 486,667
Payment of contingent liability................ (107,625) (82,751)
Payment of other liabilities................... (160,518) (240,779)
---------- -----------
1,483,386 4,751,392
Net change in (exclusive of acquisition in 1997):
Accounts receivable............................ (564,082) 105,618
Prepaid insurance and other.................... (3,800) 77,150
Accounts payable............................... 1,900,588 96,732
Accrued liabilities............................ (604,050) (151,618)
---------- -----------
Net cash provided by (used in)
operating activities................ 2,212,042 4,879,274
---------- -----------
INVESTING ACTIVITIES
Proceeds from sales of oil and gas properties...... 49,091 370,000
Acquisition of oil and gas properties.............. (129,325) (1,516,866)
Exploration and drilling capital expenditures paid. (11,661,649) (4,191,835)
---------- -----------
Net cash used in investing activities. (11,741,883) (5,338,701)
---------- -----------
FINANCING ACTIVITIES
Proceeds from bank borrowings...................... 10,500,000 10,000,000
Principal payments of bank borrowings.............. (500,000) (8,463,919)
Retirement of preferred stock...................... --- (7,650)
Preferred stock dividends.......................... (941,726) (891,308)
---------- -----------
Net cash provided by
financing activities.............. 9,058,274 637,123
---------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................................... (471,567) 177,696
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD................................ 793,358 344,551
---------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD...................................... $ 321,791 522,247
========== ===========
NON-CASH INVESTING ACTIVITIES -
Accrued capital expenditures....................... 2,953,507 1,827,561
See notes to consolidated financial statements.
7
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Series A Series B
Preferred Stock Preferred Stock Common Stock
--------------- --------------- ------------
Number Par Number Par Number Par
of Shares Value of Shares Value of Shares* Value*
--------- ----- --------- ----- ---------- ------
Balance at December 31, 1996......... 801,149 $ 801,149 --- $ --- 5,225,564 $ 1,045,113
Net income............................ --- --- --- --- --- ---
Unrealized appreciation of marketable
securities available for sale....... --- --- --- --- --- ---
Issuance of Series B preferred stock.. --- --- 750,000 750,000 --- ---
Preferred stock dividends............. --- --- --- --- --- ---
Conversion of preferred stock to
common stock........................ (3,831) (3,831) --- --- 2,993 599
Employee stock grants................. --- --- --- --- 3,846 769
Retirement of preferred stock......... (1,000) (1,000) --- ---- --- ---
-------- --------- ----------- ---------- ----------- ------------
Balance at September 30, 1997......... 796,318 $ 796,318 750,000 $ 750,000 5,232,403 $ 1,046,481
======== ========= =========== ========== =========== ============
Balance at December 31, 1997.......... 796,318 $ 796,318 750,000 $ 750,000 5,232,401 $ 1,046,481
Net loss.............................. --- --- --- --- --- ---
Unrealized depreciation of marketable
securities available for sale....... --- --- --- --- --- ---
Preferred stock dividends............. --- --- --- --- --- ---
Employee and director stock grants.... --- --- --- --- 15,302 3,060
-------- --------- ----------- ---------- ----------- ------------
Balance at September 30, 1998........ 796,318 $ 796,318 750,000 $ 750,000 5,247,703 $ 1,049,541
======== ========= =========== ========== =========== ============
Accumulated
Other
Comprehensive
Income -
Unrealized
Additional Gain (Loss) on Total
Paid-In Accumulated Marketable Stockholders'
Capital* Deficit Equity Equity
-------- ------- ------ ------
Balance at December 31, 1996......... $ 8,375,282 $ (896,444) $ (189,900) $ 9,135,200
Net income............................ --- 517,277 --- 517,277
Unrealized appreciation of marketable
securities available for sale....... --- --- 147,700 147,700
Issuance of Series B preferred stock.. 6,750,000 --- --- 7,500,000
Preferred stock dividends............. --- (891,308) --- (891,308)
Conversion of preferred stock to
common stock........................ 3,232 --- --- ---
Employee stock grants................. 24,231 --- --- 25,000
Retirement of preferred stock......... (6,650) --- --- (7,650)
----------- ----------- ----------- ------------
Balance at September 30, 1997......... $ 15,146,095 $ (1,270,475) $ (42,200) $ 16,426,219
=========== =========== =========== ============
Balance at December 31, 1997.......... $ 15,146,095 $ (3,490,618) $ 84,400 $ 14,332,676
Net loss.............................. --- (6,074,867) --- (6,074,867)
Unrealized depreciation of marketable
securities available for sale....... --- --- (495,850) (495,850)
Preferred stock dividends............. --- (941,726) --- (941,726)
Employee and director stock grants.... 79,932 --- --- 82,992
----------- ----------- ----------- ------------
Balance at September 30, 1998........ $ 15,226,027 $(10,507,211) $ (411,450) $ 6,903,225
=========== =========== =========== ============
*All 1997 share and dollar amounts have been restated to retroactively reflect
the March 1998 reverse stock split.
See notes to consolidated financial statements.
8
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1998 and 1997
(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, 1997.
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, 1998 and the results of its operations for the nine and three
months ended September 30, 1998 and 1997.
The results of operations for the nine and three month periods ended September
30, 1998 are not necessarily indicative of the results to be expected for the
full year.
NOTE B - 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, 1998, the Company
has paid approximately $321,000 in costs related to this matter and has $92,000
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.
9
NOTE C - Long Term Debt
- -----------------------
The Company has a credit facility with a bank which provides for a total
borrowing base determined by the bank periodically based in part, on the
Company's oil and gas reserve information. Such borrowing base is currently
$31,000,000. The amount outstanding under this facility as of September 30, 1998
was $28,500,000.
NOTE D - Pro Forma Financial Results of Operations
- --------------------------------------------------
Selected results of operations on a pro forma basis for the nine months ended
September 30, 1997 as if the La/Cal II Acquisition had occurred on January 1,
1997 are as follows:
Revenues............................. $ 10,357,543
Net income........................... 751,761
Loss applicable to
common stock..................... (191,110)
Basic and diluted loss per
average common share............. $ (.04)
NOTE E - Stockholders' Equity
- -----------------------------
On March 12, 1998, the Company effected a one for eight reverse stock split of
its common stock. All share and per share amounts of prior periods presented
have been adjusted to retroactively give effect to the reverse stock split.
NOTE F - Comprehensive Income
- -----------------------------
Comprehensive income for the nine and three months ended September 30, 1998 and
1997 is as follows:
Nine Months Ended Three Months Ended
September 30, September 30,
1998 1997 1998 1997
Net income (loss) $ (6,074,867) 517,277 (2,115,585) (238,756)
Other comprehensive income
Unrealized appreciation
(depreciation) on marketable
equity securities (495,850) 147,700 (200,450) 84,400
--------- --------- --------- --------
Comprehensive income (loss) (6,570,717) 664,977 (2,316,035) (154,356)
========= ========= ========= ========
10
Management's Discussion and Analysis of Financial
Condition and Results of Operations
1997 Acquisition
- ----------------
On January 31, 1997, the Company acquired the oil and gas properties of La/Cal
Energy Partners II ("La/Cal II") and certain working interest owners (the
"La/Cal II Properties") for a purchase price of $16.5 million ("La/Cal II
Acquisition"). The purchase price was comprised of $1.5 million cash, the
assumption of $7.5 million of La/Cal II long-term debt and the issuance of
750,000 shares of Series B convertible preferred stock of the Company ("Series B
Preferred Stock") with an aggregate liquidation value of $7.5 million. In
connection with the La/Cal II Acquisition, the Company's borrowing base was
increased to $22.5 million and the Company borrowed an additional $9 million
under its bank credit facility, which was used to repay $7.5 million of La/Cal
II debt and to pay the $1.5 million cash portion of the purchase price. The
Series B Preferred Stock has a dividend rate of 8.25% per annum and each share
of Series B Preferred Stock is convertible into 1.12 shares of common stock.
Such shares are redeemable by the Company after January 31, 2001 at $10.00 per
share.
Changes in Results of Operations
- --------------------------------
Nine months ended September 30, 1998 versus nine
months ended September 30, 1997
Total revenues for the nine months ended September 30, 1998 amounted to
$7,400,000 and were $2,436,000 lower than the $9,836,000 for the nine months
ended September 30, 1997 due to lower oil and gas revenues and the loss of
revenues from the pipeline joint venture. Oil and gas sales were $1,543,000
lower due almost totally to lower oil and gas prices. Revenues from the pipeline
joint venture were $0 in the first nine months of 1998 compared to $1,085,000 in
1997 due to the sale of the asset in the fourth quarter of 1997.
The following table reflects the gas and oil production volumes and pricing
information for the periods presented.
Nine months Nine months
ended September 30, 1998 ended September 30, 1997
Production Average Price Production Average Price
---------- ------------- ---------- -------------
Gas (Mcf)............. 1,874,625 $ 2.18 1,878,128 $ 2.41
Oil (Bbls)............ 205,209 $ 13.22 208,707 $ 18.33
Lease operating expense and production taxes were $1,932,000 for the nine months
ended September 30, 1998, versus $1,645,000 for the nine months ended September
30, 1997, or $287,000 higher due primarily to the Company not incurring in the
1997 period ad valorem taxes related to the La/Cal II properties which were the
11
responsibility of the La/Cal II partners. Additionally, the 1998 period included
eight additional producing wells and nine months of lease operating expense and
production taxes for the La/Cal II properties, versus eight months for 1997 due
to the effective date of the acquisition being January 31, 1998. Depletion,
depreciation and amortization was $2,959,000 for the nine months ended September
30, 1998, versus $3,851,000 for the nine months ended September 30, 1997, or
$892,000 lower substantially due to no amortization of the pipeline joint
venture in the current period compared to $741,000 in the same period a year
ago.
Exploration expense for the nine months ended September 30, 1998 was $5,325,000
versus $1,055,000 for the same period of 1997, or $4,270,000 higher due
primarily to dry hole costs of $3,539,000 in the current period compared to
$490,000 for the same period of 1997. Additionally, leasehold amortization and
seismic costs amounted to $760,000 and $642,000, respectively, for the nine
months ended September 30, 1998 versus $192,000 and $110,000 for the same period
in 1997.
Interest expense was $1,345,000 in the nine months ended September 30, 1998
compared to $1,065,000 in the nine months ended September 30, 1997 due to higher
average debt outstanding for the nine months ended September 30, 1998.
General and administrative expenses amounted to $1,914,000 in the nine months
ended September 30, 1998 versus $1,703,000 in the nine months ended September
30, 1997 due largely to expenses associated with the addition of six employees
in May 1997.
The Company's preferred stock dividends amounted to $942,000 for the nine months
ended September 30, 1998 compared to $891,000 for the prior year. The increase
is due to nine months of dividends being paid on the Company's Series B
Preferred Stock in the current year versus eight months in the prior year.
Three months ended September 30, 1998 versus three
months ended September 30,1997
Total revenues for the three months ended September 30, 1998 amounted to
$2,698,000 and were $473,000 lower than the $3,171,000 for the three months
ended September 30, 1997 due to lower oil and gas revenues and the loss of
revenues from the pipeline joint venture. Oil and gas sales were $352,000 lower
due to lower oil and gas prices partially offset by increased gas production of
approximately 26%. Revenues from the pipeline joint venture were $0 in the third
quarter of 1998 compared to $266,000 in 1997 due to the sale of the asset in the
fourth quarter of 1997.
The following table reflects the production volumes and pricing information for
the periods presented.
Three months Three months
ended September 30, 1998 ended September 30, 1997
Production Average Price Production Average Price
---------- ------------- ---------- -------------
Gas (Mcf)........... 768,365 $ 2.04 608,521 $ 2.55
Oil (Bbls).......... 69,057 11.95 70,620 16.89
12
Lease operating expense and production taxes were $644,000 for the three months
ended September 30, 1998, versus $559,000 for the three months ended September
30, 1997, or $85,000 higher. Depletion, deprecation and amortization was
$857,000 for the three months ended September 30, 1997, versus $1,201,000 for
the three months ended September 30, 1997, or $344,000 lower than the third
quarter of 1997 due to no amortization of the pipeline joint venture in the
current period compared to $174,000 in the same period a year ago. Additionally,
the production mix for the 1998 period yielded lower overall depletion rates due
to new production coming on line at lower rates in the current period and older
production being depleted at an accelerated rate in the prior period.
The Company incurred $2,154,000 of exploration expense in the third quarter of
1998, compared to $656,000 in the third quarter of 1997, or $1,498,000 higher
primarily due to dry hole costs of $1,496,000 in the third quarter of 1998
versus $473,000 in 1997. Additionally, leasehold amortization amounted to
$465,000 in the third quarter of 1998 compared to $76,000 for the same period in
1997.
Interest expense was $542,000 in the three months ended September 30, 1998
compared to $379,000 in the third quarter of 1997 due to higher average debt
outstanding for the quarter ended September 30, 1998.
General and administrative expenses amounted to $617,000 in the three months
ended September 30, 1998 versus $614,000 in the third quarter of 1997.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by in operating activities was $2,212,000 in the nine months
ended September 30, 1998 compared to $4,879,000 in the nine months ended
September 30, 1997. The Company's accompanying consolidated statements of cash
flows identify major differences between net income and net cash provided by or
used in operating activities for each of the periods presented.
Net cash used in investing activities totaled $11,742,000 for the nine months
ended September 30, 1998 compared to $5,339,000 in 1997. The nine months ended
September 30, 1998 is composed almost entirely of cash paid for exploration and
drilling capital expenditures in the period of $11,662,000. The nine months
ended September 30, 1997 reflects $4,192,000 in exploration and drilling capital
expenditures and $1,517,000 of cash paid in connection with the purchase of oil
and gas properties offset by $370,000 in proceeds from the sale of certain oil
and gas properties located in Montana.
Net cash provided by financing activities was $9,058,000 for the nine months
ended September 30, 1998 as compared to net cash used of $637,000 in the prior
year period. The 1998 amount includes borrowings of $10,500,000 by the Company
under its line of credit and pay downs under this line of credit of $500,000.
The 1997 amount included the borrowing of $9,000,000 by the Company under its
13
line of credit which was used to payoff the debt assumed from La/Cal II and to
pay the cash portion of the purchase price. The 1997 amount also includes
additional borrowings of $1,000,000 under its line of credit, pay downs of
$1,000,000 and the payoff of La/Cal II debt of $7,464,000. The 1998 period also
includes preferred dividends of $942,000 (nine months), whereas the 1997 period
contains dividends of $891,000 (eight months).
The Company has a credit facility with a bank which provides for a total
borrowing base determined by the bank periodically based in part, on the
Company's oil and gas reserve information. Such borrowing base is currently
$31,000,000. The maturity date for all amounts drawn under the bank credit
facility is June 1, 2000. Interest is based on either of two methods at the
option of the Company: the bank's prime lending rate or LIBOR plus 2%. Interest
rates are set on specific draws for one, two, three or six month periods, also
at the option of the Company. The Company's credit facility requires that
minimum net worth and debt service ratios be maintained by the Company.
Accordingly, the Company had $903,000 available for the payment of dividends at
September 30, 1998. The amount outstanding under this facility as of September
30, 1998 was $28,500,000.
The terms of the Company's Series A Preferred Stock provide that the Company
will not incur additional debt after such time as it reports financial results
which show the Company's stockholders' equity to be less than the liquidation
preference of the Series A Preferred Stock. As of September 30, 1998, the
Company's stockholders' equity was approximately $6.9 million and the
liquidation preference on the outstanding shares of the Series A Preferred Stock
was approximately $7.9 million. As a result, the Company is unable to incur
additional debt under its credit facility or from other sources at the present
time. The Company is exploring a number of alternatives to address the
restriction imposed by the Series A Preferred Stock, including the issuance of
additional equity securities. There can be no assurance that the Company will be
able to successfully address these limitations in the near term. In addition,
under the current commodity price environment the Company's ability to incur
additional indebtedness under its credit facility will be substantially
restricted by borrowing base limitations. As a result, the Company has
substantially reduced its capital spending plans for the first quarter of 1999.
The Company's capital spending plans for the remainder of 1999 will be
determined based upon the Company's ability to raise additional debt or equity
securities and the commodity prices which prevail during the remainder of the
year.
The Company had $14,744,000 in capital expenditures in the nine months ended
September 30, 1998. The Company's budget for 1998 capital expenditures was set
14
at the beginning of the year at $12,500,000. Such budget is under constant
review during the year and could change due to actual and estimated cash flow,
commodity prices, borrowing capacity and other factors and was subsequently
revised to $18,000,000. The Company expects to fund capital expenditures for the
remainder of 1998 from operating cash flow and borrowings under its bank credit
facility.
Year 2000
- ---------
The Company is in the process of assessing the ability of its various electronic
operating systems, and those of significant third parties, to appropriately
consider periods and dates after December 31, 1999. The Company's senior
financial management has taken responsibility for identifying, addressing and
monitoring its Year 2000 issues. These individuals report to the Audit Committee
of the Board of Directors on a periodic basis. For Company systems identified as
not being Year 2000 compliant, the Company has developed plans to correct these
systems and expects to be compliant on the systems by the first quarter of 1999.
As for third parties with which the Company has a material relationship, the
Company is in various stages of discussions and conclusions related to the
ability of those third parties to become compliant and the related timing
thereof.
The estimated costs associated with becoming Year 2000 compliant are not
expected to be material to the Company.
The Company has begun, but not yet completed, a comprehensive analysis of the
operational problems and costs (including loss of revenues) that would be
reasonably likely to result from the failure by the Company and certain third
parties to complete efforts necessary to achieve Year 2000 compliance timely. A
contingency plan has not been developed for dealing with the most reasonably
likely worst case scenario, and such scenario has not yet been clearly
identified. The Company currently plans to complete such analysis and
contingency planning by the first quarter of 1999.
The failure to correct a material Year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Company's Year 2000 efforts
are expected to significantly reduce the Company's level of uncertainty about
the Year 2000 problem. The Company believes that, with the implementation of new
business systems and completion of the various above-mentioned tasks as
scheduled, the possibility of interruptions to normal operations should be
significantly reduced.
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Stock Listing
- -------------
The Company has been notified by the New York Stock Exchange that it is not in
compliance with certain of the Exchange's minimum financial criteria for listed
companies. The Company has met with representatives of the Exchange and plans to
submit a three-year business plan to the Exchange in response to the notice.
Disclosure Regarding Forward-Looking Statements
- -----------------------------------------------
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 the 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
or 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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds.
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
4.1 - Amendment letter dated August 27, 1998 related to
the Credit Agreement between Goodrich Petroleum
Company of Louisiana, GPC, Inc. of Louisiana and
Compass Bank.(Previously filed with November 16, 1998
filing.)
4.2 - Amendment letter dated October 16, 1998 related to the
Credit Agreement between Goodrich Petroleum Company
of Louisiana, GPC, Inc. of Louisiana and Compass Bank.
(Previously filed with November 16, 1998 filing.)
27.1 - Financial Data Schedule(Previously filed with November
16, 1998 filing.)
27.2 - Restated Financial Data Schedule for Quarter Ended
September 30, 1997 (Previously filed with November 16,
1998 filing.)
(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)
November 13, 1998 /s/ Walter G. Goodrich
- ----------------- --------------------------------------
Date Walter G. Goodrich, President and
Chief Executive Officer
November 13, 1998 /s/ Roland L. Frautschi
- ----------------- --------------------------------------
Date Roland L. Frautschi, Senior Vice
President, Chief Financial Officer
and Treasurer
17