<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000943861
<NAME> GOODRICH PETROLEUM
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<CASH> 6,386,110
<SECURITIES> 0
<RECEIVABLES> 3,713,714
<ALLOWANCES> 25,000
<INVENTORY> 0
<CURRENT-ASSETS> 10,120,089
<PP&E> 67,792,563
<DEPRECIATION> 21,144,877
<TOTAL-ASSETS> 59,560,717
<CURRENT-LIABILITIES> 8,104,871
<BONDS> 32,470,353
0
1,462,077
<COMMON> 1,746,136
<OTHER-SE> 10,621,000
<TOTAL-LIABILITY-AND-EQUITY> 59,560,717
<SALES> 4,488,948
<TOTAL-REVENUES> 4,674,353
<CGS> 0
<TOTAL-COSTS> 3,522,621
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,182,438
<INCOME-PRETAX> (30,706)
<INCOME-TAX> 0
<INCOME-CONTINUING> (30,706)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,706)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT 1934
For the quarterly period ended March 31, 2000
----------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT 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 incorporation (I.R.S. Employer ID. No.)
or organization)
518 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 May 11, 2000 there were 8,828,204 shares of Goodrich Petroleum
Corporation common stock outstanding.
1
<PAGE>
GOODRICH PETROLEUM CORPORATION
FORM 10-Q
March 31, 2000
INDEX
Page No.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
March 31, 2000 (Unaudited) and December 31, 1999............. 3-4
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 2000 and 1999................... 5
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2000 and 1999................... 6
Consolidated Statements of Stockholders' Equity
and Comprehensive Income (Unaudited)
Three Months Ended March 31, 2000 and 1999................... 7
Notes to Consolidated Financial Statements...................... 8-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 11-15
PART II - OTHER INFORMATION 16
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
2
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.................... $ 6,386,110 $ 5,929,229
Accounts receivable
Trade and other, net of allowance.......... 1,305,126 669,741
Accrued oil and gas revenue................ 2,383,588 1,937,711
Prepaid insurance............................ 45,265 53,806
----------- ------------
Total current assets................... 10,120,089 8,590,487
----------- ------------
PROPERTY AND EQUIPMENT
Oil and gas properties
(successful efforts method).............. 67,575,019 65,401,168
Furniture, fixtures and equipment............ 217,544 213,524
----------- ------------
67,792,563 65,614,692
Less accumulated depletion, depreciation
and amortization........................... (21,144,877) (19,566,835)
------------ ------------
Net property and equipment............. 46,647,686 46,047,857
----------- ------------
OTHER ASSETS
Restricted Cash.............................. 1,250,000 ---
Other ....................................... 1,542,942 1,620,208
----------- ------------
Total Other Assets..................... 2,792,942 1,620,208
----------- ------------
TOTAL ASSETS.................... $ 59,560,717 $ 56,258,552
=========== ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long term debt................. $ 3,600,000 $ 3,600,000
Accounts payable.................................. 2,894,917 2,711,746
Accrued liabilities............................... 862,172 1,326,995
Current portion other non-current liabilities..... 747,782 1,182,306
----------- -----------
Total current liabilities................... 8,104,871 8,821,047
----------- -----------
LONG TERM DEBT ................................. 32,470,353 33,353,117
OTHER NON-CURRENT LIABILITIES
Production payment payable........................ 1,600,185 1,630,784
Accrued abandonment costs......................... 3,058,281 3,108,281
Accrued interest long term debt................... 497,814 251,154
PREFERRED STOCKHOLDERS EQUITY IN A
SUBSIDIARY COMPANY................................ --- 2,683,125
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 665,759 shares (liquidation
preference $10 per share, aggregating
to $6,657,590).............................. 665,759 665,759
Common stock, par value $0.20 per share;
authorized 25,000,000 shares; issued
and outstanding _____________ shares........ 1,746,136 1,083,434
Additional paid-in capital........................ 24,942,287 18,156,114
Accumulated deficit............................... (14,321,287) (14,290,581)
------------ -----------
Total stockholders' equity................ 13,829,213 6,411,044
------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY.......................... $ 59,560,717 $ 56,258,552
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
2000 1999
<S> <C> <C>
REVENUES
Oil and gas sales................................$ 4,488,948 2,822,869
Other............................................ 184,842 118,827
---------- ----------
Total revenues................................... 4,673,790 2,941,696
---------- ----------
EXPENSES
Lease operating expense and production taxes..... 1,340,665 666,754
Depletion, depreciation and amortization......... 1,303,763 1,308,553
Exploration...................................... 360,814 398,781
Interest expense................................. 1,182,438 520,480
General and administrative....................... 479,015 563,882
Preferred dividend requirements of a subsidiary.. 38,364 ---
---------- ----------
Total costs and expenses................... 4,705,059 3,458,450
---------- ----------
GAIN (LOSS) ON SALE OF ASSETS......................... 563 (519,495)
---------- ----------
LOSS BEFORE INCOME TAXES.............................. (30,706) (1,036,249)
Income taxes .................................... --- ---
---------- ----------
NET LOSS ........................................... (30,706) (1,036,249)
Preferred stock dividends
(2000 and 1999 amounts in arrears)......... 307,607 313,912
---------- ----------
LOSS APPLICABLE TO COMMON STOCK ......................$ (338,313) (1,350,161)
========== ==========
BASIC LOSS PER AVERAGE COMMON SHARE ..................$ (.05) (.26)
========== ==========
DILUTED LOSS PER AVERAGE COMMON SHARE ................$ (.05) (.26)
========== ==========
AVERAGE COMMON SHARES OUTSTANDING .................... 6,965,415 5,247,705
========== ==========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
------------------------
2000 1999
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss...........................................$ (30,706) (1,036,249)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depletion, depreciation and amortization......... 1,303,763 1,308,553
Amortization of leasehold costs.................. 274,279 290,021
Amortization of deferred debt financing.......... 111,089 ---
Accrued interest on private placement borrowings. 246,660 ---
Amortization of detachable stock
purchase warrants.............................. 142,500 ---
Preferred dividends of subsidiary................ 38,364 ---
(Gain) Loss on sale of asset..................... (563) 519,495
Capital expenditures charged to income........... --- 4,564
---------- -----------
2,085,386 1,086,384
Net change in:
Accounts receivable.............................. (1,081,262) 1,448,040
Prepaid insurance and other...................... 4,718 (24,559)
Accounts payable................................. 183,171 (580,358)
Accrued liabilities.............................. (464,822) (395,367)
Other Liabilities................................ (484,525) ---
----------- -----------
Net cash provided by operating activities...... 242,666 1,534,140
----------- -----------
INVESTING ACTIVITIES
Proceeds from sales of assets.................... 126,050 240,105
Acquisition of oil and gas properties............ (1,198,631) ---
Capital expenditures............................. (1,104,727) (1,511,692)
----------- -----------
Net cash used in investing activities.......... (2,177,308) (1,271,587)
----------- -----------
FINANCING ACTIVITIES
Proceeds from private placement of common stock.. 4,500,000 ---
Principal payments of bank borrowings............ (1,025,264) ---
Exercise of stock purchase warrants.............. 217,511 ---
Exercise of director stock options............... 9,875 ---
Net change in restricted cash.................... (1,250,000) ---
Production payments.............................. (30,599) ---
Payment of debt restructure costs................ (30,000) ---
----------- -----------
Net cash provided by financing activities...... 2,391,523 ---
---------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS........... 456,881 262,553
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.... 5,929,229 95,630
---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..........$ 6,386,110 358,183
========== ===========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Three Months Ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Series A* Series B*
Preferred Stock Preferred Stock Common Stock
--------------- --------------- ------------
Number of Par Number of Par Number of Par
Shares Value Shares Value Shares Value
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 796,318 $ 796,318 750,000 $ 750,000 5,247,705 $ 1,049,541
Net Loss --- --- --- --- --- ---
Realized loss on sale of marketable
securities --- --- --- --- --- ---
Total Comprehensive Income (Loss) --- --- --- --- --- ---
Balance at March 31, 1999 796,318 $ 796,318 750,000 $ 750,000 5,247,705 $ 1,049,541
------- ------- ------- ------- --------- ---------
Balance at December 31, 1999 796,318 $ 796,318 656,759 $ 665,759 5,417,171 $ 1,083,434
Net Loss --- --- --- --- --- ---
Total Comprehensive Income (Loss) --- --- --- --- --- ---
Issuance of Common Stock --- --- --- --- 1,533,333 306,667
Conversion of preferred stock of
subsidiary to common stock --- --- --- --- 1,547 665 309,533
Exercise of director stock option --- --- --- --- 12,500 2,500
Exercise of common stock
purchase warrants --- --- --- --- 220,011 44,002
------- ------- ------- ------- --------- ---------
Balance at March 31, 2000 796,318 $ 796,318 665,759 $ 665,759 8,730,680 $ 1,746,136
------- ------- ------- ------- --------- ---------
</TABLE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Three Months Ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other Comprehensive Loss
Additional Unrealized Gain (Loss) Total
Paid-In Accumulated on Marketable Stockholders'
Capital Deficit Equity Securities Equity
------- ------- ----------------- ------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $ 15,226,027 $ (12,461,598) $ (400,900) $ 4,959,388
Net Loss --- (1,036,249) --- (1,036,249)
Realized loss on sale of marketable
securities --- --- --- ---
---------- ---------- ------------ ----------
Total Comprehensive Income (Loss) --- --- --- (635,349)
Balance at March 31, 1999 $ 15,226,027 $ (13,497,847) $ --- $ 4,324,039
---------- ---------- ------------ ----------
Balance at December 31, 1999 $ 18,156,114 $ (14,290,581) $ --- $ 6,411,044
Net Loss --- (30,706) --- (30,706)
Total Comprehensive Income (Loss) --- --- --- (30,706)
----------
Issuance of Common Stock 4,193,333 --- --- 4,500,000
Conversion of preferred stock of
subsidiary to common stock 2,411,956 --- --- 2,721,489
Exercise of director stock option 7,375 --- --- 9,875
Exercise of common stock purchase warrants 173,509 --- --- 217,511
---------- ---------- ----------- ----------
Balance at March 31, 2000 $ 24,942,287 $ (14,321,287) $ --- $ 13,829,213
---------- ---------- ----------- ----------
</TABLE>
*Dividends are cumulative and arrearages amounted to $1,556,950 and $313,912
or $0.22 and $.06 per share at March 31, 2000 and 1999 respectively.
See notes to consolidated financial statements.
7
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(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, 1999.
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of the Company as
of March 31, 2000 and the results of its operations for the three months ended
March 31, 2000 and 1999.
The results of operations for the three-month period ended March 31, 2000 are
not necessarily indicative of the results to be expected for the full year.
NOTE B - Acquisition of Oil and Gas Properties
- ----------------------------------------------
On March 2, 2000, the Company completed its acquisition of working
interests in the Burrwood and West Delta 83 Fields, comprising approximately
8,600 acres, in Plaquemines Parish, Louisiana for $1,650,000 and the assumption
of the fields plugging and abandonment obligation estimated at $5,000,000. The
Company acquired an approximate 95% working interest of all rights from the
surface to approximately 10,600' and an approximate 47.5% working interest in
the deep rights below 10,600'. In connection with the acquisition the Company
secured a performance bond and established an escrow account to be used for the
payment of obligations associated with the plugging and abandonment of the
wells, salvage and removal of platforms and related equipment, and the site
restoration of the fields. Required escrowed outlays include an initial cash
payment of $750,000 and monthly cash payments of $70,000 until June 1, 2005
subject to a redetermination at August 1, 2000. In addition, as part of the
purchase agreement, the Company has agreed to shoot a 3-D seismic survey over
the fields by June 30, 2001 or remit payment to the seller in the amount of
$3,500,000. The cost of the seismic study is expected to be approximately
$2,500,000 and the Company has escrowed cash compensating balances of $500,000
with Compass Bank to be used solely for payments or reimbursements of amounts
expended in satisfaction of the seismic requirement. The Company has identified
a number of development opportunities in the fields, which it plans to begin
exploiting in the year 2000.
8
<PAGE>
NOTE C - Private Placement
- --------------------------
On February 18, 2000, the Company completed a private placement of shares
of its common stock resulting in net proceeds to the Company of $4,500,000. The
Company issued 1,533,333 shares of common stock in an offering, which began on
January 28, 2000. The $4,500,000 in offering proceeds, in addition to the
Company's existing working capital and anticipated cash flow from operations,
have been used to assist in the acquisition of and will be used in the
development of the Burrwood and West Delta 83 fields, and to further develop the
Lafitte field purchased in 1999. The Company owns an approximate 49% working
interest in the Lafitte field in Jefferson Parish, Louisiana, which was acquired
in September 1999.
Note D - Conversion of Preferred Units
- --------------------------------------
On January 28, 2000, the Company notified holders of Goodrich Petroleum Company,
LLC's Series A Preferred Units that it intended to call for redemption all the
outstanding units which were convertible into the Company's common stock at
$2.00 per share. On February 17, 2000, all of the holders of the Preferred
Units, representing one hundred percent of the $3,000,000 of outstanding Units,
converted the Units into approximately 1,550,000 shares of the common stock of
Goodrich Petroleum Corporation. The conversion of the preferred units and
private placement increased the Company's stockholders equity by approximately
$7,200,000.
NOTE E - Lafitte Field Acquisition
- ----------------------------------
On September 23, 1999 the Company acquired an approximate 49% working interest
in the Lafitte Field located in Jefferson Parish, Louisiana for $2,940,000. The
field encompasses over 8,000 acres and is located approximately thirty miles
south of New Orleans. The Company commenced development activities in the fourth
quarter of 1999.
The consideration granted to seller included a production payment to be
satisfied through the delivery of production from the property. In connection
with the transaction, the Company recorded a production payment liability of
approximately $2,200,000, representing the discounted present value of the
estimated production payments necessary to satisfy the obligation.
Additionally, the Company recorded a $3,800,000 liability for its interest in
the estimated plugging and abandonment costs assumed in connection with the
purchase. It is expected that approximately $265,000 of the costs will be funded
within the next 12 months.
NOTE F - Commitments and Contingencies
- --------------------------------------
The U.S. Environmental Protection Agency ("EPA") has identified the Company as a
potentially responsible party ("PRP") for the cost of clean-up of "hazardous
substances" at an oil field waste disposal site in Vermilion Parish, Louisiana.
The Company has estimated that the remaining cost of long-term clean-up of the
site will be approximately $4.5 million with the Company's percentage of
responsibility to be approximately 3.05%. As of March 31, 2000, the Company has
paid approximately $321,000 in costs related to this matter and $122,500 accrued
for the remaining liability. These costs have not been discounted to their
present value. The EPA and the PRPs will continue to evaluate the site and
9
<PAGE>
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 - Preferred Stock Dividends
- ----------------------------------
Beginning in 1999, the Company suspended dividend payments on its Series A and
Series B convertible preferred stock. Dividends on both classes of its preferred
stock is cumulative and arrearages amounted to $307,000 and $313,000 for the
quarters ended March 31, 2000 and 1999, respectively. Total cumulative
arrearages amounted to $1,557,000 at March 31, 2000. Accordingly, undeclared
dividends held in arrears have been considered in computing loss per share
amounts applicable to common stockholders.
NOTE H - Stock Option Plan
- --------------------------
At the March 29, 2000 Board of Directors meeting, the Compensation Committee
voted to accelerate the vesting schedule on options granted to employees on
February 25, 1999. The vesting period for the applicable options was immediate
and the total number of options affected was 235,696.
NOTE I - Income Taxes
- ---------------------
No provision for income taxes has been recorded for the Company for the three
months ended March 31, 2000 and 1999 due to its incurring a net operating loss
for each period. A valuation allowance has been provided for the amount of net
operating losses incurred.
10
<PAGE>
Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Changes in Results of Operations
- --------------------------------
Three months ended March 31, 2000 versus three months ended March 31,1999
Total revenues for the three months ended March 31, 2000 amounted to $4,674,000
and were $1,732,000 higher than the $2,942,000 for the three months ended March
31, 1999 due to higher oil and gas revenues. Oil and gas sales were $1,666,000
higher due primarily to significantly higher oil and gas prices for the current
period, partially offset by lower gas volumes compared to the same period in
1999. Oil and gas sales were reduced by 485,000 in the three months ended March
2000 as a result of the settlement of the Company's outstanding futures
contracts. The Company incurred a loss on the sale of marketable equity
securities of $519,000 for the three months ended March 31, 1999.
The following table reflects the production volumes and pricing information for
the periods presented.
<TABLE>
<CAPTION>
Three months Three months
ended March 31, 2000 ended March 31, 1999
-------------------------- ---------------------------
Production Average Price Production Average Price
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Gas (Mcf)........... 711,822 $ 2.58 884,956 $ 1.82
Oil (Bbls).......... 109,744 24.18 114,620 10.55
</TABLE>
Lease operating expense and production taxes were $1,341,000 for the three
months ended March 31, 2000, versus $667,000 for the three months ended March
31, 1999 due in part to the increased costs associated with the Company's
Lafitte and Burrwood/West Delta 83 Field acquisitions and higher lease operating
costs associated with certain older, mature oil and gas fields. Depletion,
depreciation and amortization was $1,304,000 for the three months ended March
31, 2000 versus $1,309,000 for the three months ended March 31, 1999, or $5,000
lower due to higher overall depletion rates in the first quarter of 2000 versus
1999 offset by lower volumes in the three months ended March 31, 2000.
Exploration expense in the first quarter of 2000 was $361,000 versus $399,000 in
the first quarter of 1999, or $38,000 lower due primarily to seismic costs and
prospect depreciation of $-0- and $274,000 respectively, in the first quarter of
2000 versus $34,000 and $290,000 respectively, in the same period in 1999.
Interest expense was $1,144,000 in the three months ended March 31, 2000
compared to $520,000 in the first quarter of 1999 due to the Company having a
higher effective interest rate and higher average debt outstanding for the
quarter ended March 31, 2000 as a result of the September 1999 private
11
<PAGE>
placement. 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.
General and administrative expenses amounted to $479,000 in the three months
ended March 31, 2000 versus $564,000 in the first quarter of 1999.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities was $243,000 in the three months ended
March 31, 2000 compared to $1,534,000 in the three months ended March 31, 1999.
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 $2,177,000 for the first quarter
of 2000 compared to $1,272,000 in 1999. The three months ended March 31, 2000
reflects cash paid in connection with the acquisition of oil and gas properties
of $1,199,000, and capital expenditures totaling $1,105,000 and proceeds from
the sale of oil and gas properties of $126,000. The three months ended March 31,
1999 consists of capital expenditures of $1,512,000 and proceeds from the sale
of marketable equity securities of $240,000.
Net cash provided by financing activities was $2,392,000 for the current period
as compared to $0 in 1999. The 2000 amount includes proceeds from the issuance
of common stock of $4,500,000 and pay downs by the Company under its line of
credit of $1,025,000. The 2000 amount includes changes in restricted cash of
$1,250,000, production payments of $31,000 and debt financing costs of $30,000.
In addition, the 2000 amount includes proceeds from the exercise of stock
options and warrants of $227,000.
Compass Credit Facility
- -----------------------
On March 2, 2000 the Company amended its credit agreement with Compass Bank. The
amended facility provides for a Borrowing Base of $27,100,000 with continued
monthly reductions of $300,000, until July 1, 2001. The maturity date for
amounts drawn under the bank credit facility is July 1, 2001 with no borrowing
base redeterminations conducted prior to that date. Interest on the credit
facility is the Compass Bank Index Rate plus 5/8%.
Substantially all of the Company's assets are pledged to secure this credit
facility.
The revised credit facility requires the net proceeds of asset sales be used to
extinguish outstanding principal and interest under the borrowing base.
Additionally, under the terms of the credit facility, the Company may not make
any distributions or pay dividends, including dividends on any class of its
preferred stock without lender approval.
The Company had $2,303,000 in capital expenditures in the three months ended
March 31, 2000. The Company's budget for 2000 capital expenditures was set at
the beginning of the year at $12,500,000. Such budget is under constant review
12
<PAGE>
during the year and could change due to actual and estimated cash flow,
commodity prices, business opportunities and other factors. The Company expects
to fund capital expenditures for the remainder of 2000 from operating cash flow,
cash and other financing arrangements.
Stock Listing
- -------------
On July 28, 1999 the Company was notified by the New York Stock Exchange that it
had revised its minimum financial criteria for listed companies and the time
frame required for listed companies to become compliant. In addition, the
Company was informed that it was not in compliance with the revised criteria.
The Company submitted a revised twelve-month business plan to the Exchange in
response to the notice on September 10, 1999. The business plan was accepted by
the New York Stock Exchange and will be monitored by the Exchange for compliance
on a quarterly basis. The short-term nature of the business plan may make it
difficult to adhere to this business plan. If the Company fails to do so, there
can be no assurance that the New York Stock Exchange will not delist the
Company's common stock.
Accounting Matters
- ------------------
The Financial Accounting Standards Board issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, in June 1997. This statement
established accounting and reporting standards for derivative instruments and
hedging activities. Effective January 1, 2001, the Company must recognize the
fair value of all derivative instruments as either assets or liabilities in its
Consolidated Balance Sheet. As derivative instruments meeting certain conditions
may be designated as a hedge of a specific exposure, accounting for changes in a
derivative's fair value will depend on the intended use of the derivative and
the resulting designation. Any transition adjustments resulting from adopting
this statement will be reported in net income of other comprehensive income, as
appropriate, as the cumulative effect of a change in accounting principle
period. As described under the heading "Quantitative and Qualitative Disclosures
About Market Risk" below of this Form 10-Q report, the Company makes use of
derivative instruments to hedge specific market risks. The Company has not yet
determined the effects that SFAS No. 133 will have on its future consolidated
financial statements or the amount of the cumulative adjustment that will be
made upon adopting this new standard.
Quantitative and Qualitative Disclosures About Market Risk
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Debt and debt-related derivatives
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The Company is exposed to interest rate risk on its long-term debt with
variable interest rates. Based on the overall interest rate exposure on variable
rate debt at March 31, 2000 a hypothetical 2% change in the interest rates would
increase interest expense by approximately $721,000.
Hedging Activity
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The Company engages in futures contracts ("Agreements") with certain of
its production. The Company considers these to be hedging activities and, as
such, monthly settlements on these contracts are reflected in oil and gas sales.
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In order to consider these futures contracts as hedges, (i) the Company must
designate the futures contract as a hedge of future production and (ii) the
contract must reduce the Company's exposure to the risk of changes in prices.
Changes in the market value of futures contracts treated as hedges are not
recognized in income until the hedged item is also recognized in income. If the
above criteria are not met, the Company will record the market value of the
contract at the end of each month and recognize a related gain or loss. Proceeds
received or paid relating to terminated contracts or contracts that have been
sold are amortized over the original contract period and reflected in oil and
gas sales. 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.
The Agreements provide for separate contracts tied to the NYMEX light
sweet crude oil and natural gas futures contracts. The Company has contracts
which contain specific contracted prices ("Swaps") or price ranges ("Collars")
that are settled monthly based on the differences between the contract price or
price ranges and the average NYMEX prices for each month applied to the related
contract volumes. To the extent the average NYMEX price exceeds the contract
price, the Company pays the spread, and to the extent the contract price exceeds
the average NYMEX price the Company receives the spread.
As of March 31, 2000, the Company's open forward position on its outstanding
crude oil was as follows:
(a) 350 barrels of oil per day with a no cost "collar" of $19.00 and $21.00 per
barrel through December 2000;
(b) 150 barrels of oil per day with a no cost "collar" of $18.20 and $20.20 per
barrel through December 2000; and
(c) 300 barrels of oil per day on a crude oil "swap" with a price of $23.98 per
barrel through April 2000.
(d) 500 barrels of oil per day with a no cost "collar" of $21.00 and $29.00 per
barrel beginning May 2000 through September 2000.
At March 31, 2000 the Company's open forward position on its outstanding
crude oil hedging contracts was 800 bbl per day at an average price of $21.29.
The fair value of the crude oil hedging contracts in place at March 31, 2000
resulted in a liability of $670,000.
At March 31, 2000 the Company's open forward position on its outstanding
gas hedging contracts was 5,000 Mcf per day with a "floor" price of $2.50 per
Mcf through October 2000. The cost of the "floor" contract hedge is $0.23 per
Mcf over the "floor" price. The fair value of the natural gas hedging contracts
in place at March 31, 2000 resulted in a liability of $170,000.
Price fluctuations and the volatile nature of markets
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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
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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
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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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On February 28, 2000, the Company commenced a suit against the operator
and joint owner of the Lafitte Field, alleging certain items of misconduct and
violations of the letter agreement associated with the joint acquisition. The
suit is in its early stages and it is too early to predict a likely outcome,
however, as the Company is the plaintiff in this action, this action is not
expected to have a significantly adverse impact on the operation or financial
position of the Company.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 - Financial Data Schedule
(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)
/s/ Walter G. Goodrich
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Date Walter G. Goodrich, President and
Chief Executive Officer
/s/ Roland L. Frautschi
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Date Roland L. Frautschi, Senior Vice
President, Chief Financial Officer
and Treasurer
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