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, 2000
-------------------------------------------------
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 13, 2000, there were 13,315,522 shares of Goodrich Petroleum
Corporation common stock outstanding.
1
<PAGE>
GOODRICH PETROLEUM CORPORATION
FORM 10-Q
September 30, 2000
INDEX
<TABLE>
Page No.
PART 1 - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements.
Consolidated Balance Sheets
September 30, 2000 (Unaudited) and December 31, 1999........... 3-4
Consolidated Statements of Operations (Unaudited)
Nine Months Ended September 30, 2000 and 1999.................. 5
Three Months Ended September 30, 2000 and 1999................. 6
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2000 and 1999.................. 7
Consolidated Statements of Stockholders' Equity and
Comprehensive Income(Unaudited)
Nine Months Ended September 30, 2000 and 1999.................. 8
Notes to Consolidated Financial Statements........................ 9-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 13-19
Item 3. Quantitative and Qualitative Disclosure about Market Risk 19
PART II - OTHER INFORMATION 20
Item 2. Changes in Securities and Use of Proceeds.
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
2
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents...........................$ 2,030,396 $ 5,929,229
Accounts receivable
Trade and other, net of allowance................. 1,107,992 669,741
Accrued oil and gas revenue....................... 4,796,421 1,937,711
Prepaid insurance and other......................... 147,990 53,806
----------- -----------
Total current assets.......................... 8,082,799 8,590,487
----------- -----------
PROPERTY AND EQUIPMENT
Oil and gas properties (successful efforts method).. 76,030,100 65,401,168
Furniture, fixtures and equipment................... 229,162 213,524
----------- -----------
76,259,262 65,614,692
Less accumulated depletion, depreciation
and amortization.................................. (24,097,747) (19,566,835)
------------ -----------
Net property and equipment.................... 52,161,515 46,047,857
----------- -----------
OTHER ASSETS
Restricted Cash..................................... 1,030,000 ---
Deferred Taxes...................................... 1,655,032 ---
Other .............................................. 329,384 1,620,208
----------- -----------
Total Other Assets............................ 3,014,416 1,620,208
----------- -----------
TOTAL ASSETS...........................$ 63,258,730 $ 56,258,552
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
September 30, 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................................. 5,063,377 2,711,746
Accrued liabilities.............................. 1,241,862 1,326,995
Current portion other non-current liabilities.... 1,240,454 1,182,306
----------- -----------
Total current liabilities.................. 11,145,693 8,821,047
----------- -----------
LONG TERM DEBT ................................ 20,265,000 33,353,117
OTHER NON-CURRENT LIABILITIES
Production payment payable....................... 697,902 1,630,784
Accrued abandonment costs........................ 3,452,855 3,108,281
Accrued interest long term debt.................. --- 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 660,839 and 665,759 shares,
respectively (liquidation preference $10
per share, aggregating to $6,608,839)...... 660,839 665,759
Common stock, par value $0.20 per share;
authorized 25,000,000 shares; issued
and outstanding 12,315,522 and 5,417,171
shares, respectively....................... 2,463,104 1,083,434
Additional paid-in capital.................... 34,894,343 18,156,114
Accumulated deficit........................... (11,117,324) (14,290,581)
----------- -----------
Total stockholders' equity.......... 27,697,280 6,411,044
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY... $ 63,258,730 $ 56,258,552
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
REVENUES
Oil and gas sales.................................. $ 19,656,078 9,198,913
Other................................................ 382,229 204,074
---------- ----------
Total revenues............................... 20,038,307 9,402,987
---------- ----------
EXPENSES
Lease operating expense and production taxes....... 5,000,863 2,007,520
Depletion, depreciation and amortization............. 4,227,460 3,549,541
Exploration........................................ 2,084,469 1,295,032
Interest expense................................... 3,696,048 1,678,186
General and administrative......................... 1,711,525 1,617,350
Preferred dividend requirements of a subsidiary.... 38,364 ---
---------- ----------
Total costs and expenses..................... 16,758,729 10,147,629
---------- ----------
GAIN (LOSS) ON SALE OF ASSETS........................ 307,299 (519,495)
INCOME (LOSS) BEFORE INCOME TAXES.................... 3,586,877 (1,264,137)
Income tax benefit................................. (1,655,032) ---
----------- ----------
NET INCOME (LOSS) ................................... 5,241,909 (1,264,137)
Preferred stock dividends.......................... 886,685 941,736
---------- ----------
INCOME (LOSS) APPLICABLE TO COMMON STOCK............. $ 4,355,224 (2,205,873)
========== ===========
BASIC INCOME (LOSS) PER AVERAGE COMMON SHARE ........ .49 (.42)
========== ===========
DILUTED INCOME (LOSS) PER AVERAGE COMMON SHARE ...... .35 (.42)
========== ===========
AVERAGE COMMON SHARES OUTSTANDING - BASIC............ 8,873,159 5,262,320
AVERAGE COMMON SHARES OUTSTANDING - DILUTED.......... 15,050,900 5,262,320
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
REVENUES
Oil and gas sales................................. $ 8,590,027 3,591,091
Other............................................. 96,349 40,671
---------- ----------
Total revenues.............................. 8,686,376 3,631,762
---------- ----------
EXPENSES
Lease operating expense and production taxes...... 1,956,296 639,986
Depletion, depreciation and amortization.......... 1,659,354 1,082,585
Exploration....................................... 1,358,282 472,958
Interest expense.................................. 1,304,055 596,014
General and administrative........................ 514,268 492,090
---------- ----------
Total costs and expenses.................... 6,792,255 3,283,633
---------- ----------
GAIN ON SALE OF ASSETS............................. 33,475 ---
---------- ----------
INCOME BEFORE INCOME TAXES......................... 1,927,596 348,129
Income tax benefit................................. (1,655,032) ---
----------- ----------
NET INCOME ........................................ 3,582,628 348,129
Preferred stock dividends......................... 295,562 313,912
---------- ----------
INCOME APPLICABLE TO COMMON STOCK.................. $ 3,287,066 34,217
========== ==========
BASIC INCOME PER AVERAGE COMMON SHARE ............. $ .31 .01
========== ==========
DILUTED INCOME PER AVERAGE COMMON SHARE ........... $ .23 .01
========== ==========
AVERAGE COMMON SHARES OUTSTANDING - BASIC.......... 10,644,423 5,277,705
AVERAGE COMMON SHARES OUTSTANDING - DILUTED........ 15,505,616 5,277,705
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
2000 1999
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss).....................................$ 5,241,909 (1,264,137)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depletion, depreciation and amortization......... 4,227,460 3,549,541
Amortization of leasehold costs.................. 762,914 841,321
Amortization of deferred debt-financing............... 300,292 ---
Deferred tax benefit............................... (1,655,032) ---
Accrued interest and other charges on private
placement borrowings............................. 973,631 ---
Amortization of detachable stock purchase warrants. 357,016 ---
Amortization of production payment discount........ 177,999 ---
Preferred dividend requirement of a subsidiary..... 38,364 ---
(Gain) Loss on sale of asset....................... (307,299) 519,495
Director stock grant............................... 30,000 30,000
Capital expenditures charged to income............. 954,640 119,800
Payment of contingent liability.................... --- (68,636)
----------- -----------
11,101,894 3,727,384
Net change in:
Accounts receivable................................ (3,296,961) 1,032,251
Prepaid insurance and other........................ (107,103) 159,344
Accounts payable ................................. 2,321,635 (5,124,999)
Accrued liabilities................................ (55,133) (868,960)
Other liabilities.................................. (484,525) ---
------------ ----------
Net cash provided by(used in)operating activities. 9,479,807 (1,074,980)
------------ ----------
INVESTING ACTIVITIES
Proceeds from sales of assets......................... 459,526 240,105
Acquisition of oil and gas properties................. (1,198,631) (3,719,021)
Capital expenditures.................................. (10,783,174) (1,861,980)
------------ -----------
Net cash used in investing activities............... (11,522,279) (5,340,896)
------------ -----------
FINANCING ACTIVITIES
Proceeds from private placement of common stock....... 4,500,000 ---
Principal payments of bank borrowings................. (3,225,617) (1,500,000)
Preferred stock dividends............................. (2,068,652) ---
Proceeds from Private Placement borrowings............ --- 12,000,000
Proceeds from preferred stock issue................... --- 3,000,000
Payment of private placement financing costs.......... --- (1,133,612)
Exercise of stock purchase warrants................... 249,322 ---
Exercise of employee stock options.................... 191,444 ---
Exercise of director stock options.................... 9,875 ---
Net change in restricted cash......................... (1,030,000) ---
Production payments................................... (452,733) ---
Payment of debt restructure costs..................... (30,000) ---
----------- ----------
Net cash provided by (used in)financing activities.. (1,856,361) 12,366,388
----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... (3,898,833) 5,950,512
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....... 5,929,229 95,630
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............$ 2,030,396 6,046,142
=========== ==========
NON-CASH ACTIVITIES
Conversion of net carrying amount of notes payable
and accrued interest............................. 10,130,349 ---
Acquisition of oil and gas properties and assumption
of related liabilities........................... --- 6,036,342
Costs of private placement............................ --- 355,800
Accrued capital expenditures and financing costs...... --- 576,536
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Nine Months Ended September 30, 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) --- --- --- --- --- ---
Directors stock grant --- --- --- --- 30,000 6,000
Balance at September 30, 1999 796,318 $ 796,318 750,000 $ 750,000 5,277,705 $ 1,055,541
------- ------- ------- ------- ---------- ---------
Balance at December 31, 1999 796,318 $ 796,318 665,759 $ 665,759 5,417,171 $ 1,083,434
Net Income --- --- --- --- --- ---
Total Comprehensive Income --- --- --- --- --- ---
Issuance of Common Stock --- --- --- --- 1,533,333 306,667
Conversion of preferred stock of
subsidiary to common stock --- --- --- --- 1,547 665 309,533
Exercise of director stock option --- --- --- --- 12,500 2,500
Conversion of Notes Payable and issuance of
Common Stock in connection therewith --- --- --- --- 3,295,647 659,130
Preferred Stock Dividends --- --- --- --- --- ---
Exercise of Common Stock Purchase Warrants --- --- --- --- 252,022 50,403
Exercise of employee stock option --- --- --- --- 245,698 49,140
Director stock grant --- --- --- --- 6,000 1,200
Conversion of Series B preferred
stock to common stock --- --- (4,920) (4,920) 5,486 1,097
------- ------- ------- ------- ---------- ---------
Balance at September 30, 2000 796,318 $ 796,318 660,839 $ 660,839 12,315,522 $ 2,463,104
------- ------- ------- ------- ---------- ---------
</TABLE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Nine Months Ended September 30, 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 --- (1,612,265) --- (1,612,265)
Realized loss on sale of marketable securities --- --- 400,900 400,900
Total Comprehensive Income (Loss) --- --- --- (1,211,365)
Directors stock grant 24,000 --- --- 30,000
---------- ----------- --------------- ------------
Balance at September 30, 1999 $15,250,027 $ (14,073,863) $ --- $ 3,778,023
========== =========== =============== ============
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 to common stock 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 9,751,719 --- --- 10,410,849
Preferred Stock Dividends --- (2,068,652) --- (2,068,652)
Exercise of common stock purchase warrants 198,919 --- --- 249,322
Exercise of employee stock option 142,304 --- --- 191,444
Director stock grant 28,800 --- --- 30,000
Conversion of Series B preferred
stock to common stock 3,823 --- --- ---
---------- ----------- --------------- ------------
Balance at September 30, 2000 $34,894,343 $ (11,117,324) $ --- $ 27,697,280
========== =========== =============== ============
</TABLE>
*Dividends are cumulative and arrearages amounted to $941,726, or $.12 per share
at September 30, 1999
See notes to consolidated financial statements.
8
<PAGE>
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 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 September 30, 2000 and the results of its operations for the nine and three
months ended September 30, 2000 and 1999.
The results of operations for the nine and three month periods ended September
30, 2000 are not necessarily indicative of the results to be expected for the
full year.
NOTE B - Conversion of Convertible Notes
----------------------------------------
On August 17, 2000, the holders of approximately $12,943,000 of principle and
accrued interest on convertible notes issued by two of the Company's
subsidiaries in a private placement in September 1999 converted their notes into
3,235,647 shares of the Company's common stock. The conversion of the notes
increased stockholders equity by approximately $10,130,000, inclusive of
approximately $1,033,000 in remaining deferred loan financing costs which have
been eliminated.
The Company arranged a standy-by underwriting to finance the purchase of
convertible notes from noteholders that elected not to convert their notes into
the Company's common stock. Notes purchased by the underwriters were
subsequently converted into shares of the Company's common stock on the same
terms as the notes originally tendered for conversion. Two of the underwriters
are, or are affiliates of, members of the Company's board. Each underwriter
received 15,000 shares of the Company's common stock as compensation for their
services. In addition, one of the underwriters received an additional 15,000
shares of common stock for their role as agent for the noteholders. The Company
issued 60,000 shares of common stock as consideration for underwriting and
noteholder agent assistance relative to the conversion of the notes, which
resulted in a charge to interest expense of $280,500.
9
<PAGE>
NOTE C - 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 net purchase price of $1,198,000 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
beginning June 1, 2000 and continuing until June 1, 2005. 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 3-D seismic survey began in July 2000 and is approximately 40%
complete at September 30, 2000. The Company anticipates that the seismic survey
will be completed on or before June 30, 2001. The cost of the seismic survey is
expected to be approximately $2,500,000 and the Company has incurred seismic
study costs of approximately $1,250,000 through September 30, 2000.
NOTE D - Private Placement
--------------------------
On February 18, 2000, the Company completed a private placement of 1,500,000
shares of its common stock resulting in net proceeds to the Company of
$4,500,000. The net proceeds from the offering, in addition to the Company's
existing working capital and anticipated cash flow from operations, have been
used to assist in the acquisition and 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 E - 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 300,000
outstanding Preferred Units, converted their Units into approximately 1,550,000
shares of the Company's common stock. The conversion of the preferred units and
private placement increased the Company's stockholders equity by approximately
$7,200,000.
NOTE F - Income (Loss) Per Share
--------------------------------
Net income (loss) was used as the numerator in computing both basic and diluted
income (loss) per Common share for the three and nine months ended September 30,
2000 and 1999. The following table reconciles the weighted-average shares
outstanding used for these computations.
10
<PAGE>
Reconciliation of Shares Outstanding
------------------------------------
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic Method............ 10,644,423 5,277,705 8,873,159 5,262,320
Dilutive Stock Warrants. 2,744,955 --- 2,757,535 ---
Dilutive Stock Options.. 396,770 --- 653,787 ---
Convertible Debt........ 1,719,468 --- 2,766,419 ---
----------- ---------- ----------- ----------
Diluted Method.......... 15,505,616 5,277,705 15,050,900 5,262,320
</TABLE>
The computations of earnings per share in the consolidated Statements of Income
did not consider outstanding convertible preferred stock convertible into
1,068,661 shares of common stock for the three and nine months ended September
30, 2000 because the effects of these convertible securities would have improved
the Company's earnings per share.
On September 29, 2000, the Company paid an aggregate of approximately $1.8
million of dividend arrearages and $296,000 of regular quarterly dividends on
its outstanding series of preferred stock. These payments brought the Company
current on both series of preferred stock. Ongoing quarterly dividend payments
on each of the Company's series of preferred stock are subject to the terms and
conditions of its credit facility.
During 1999 cash dividend payments on its Series A and Series B convertible
preferred stock were suspended. Dividends in arrears amounted to $942,000 and
$314,000 for the nine and three months ended September 30, 1999.
NOTE G - 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 $3.5 million with the Company's percentage of
responsibility to be approximately 3.05%. As of September 30, 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
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.
11
<PAGE>
On October 17, 2000, the Company reached an agreement with all of the holders of
its Series B preferred stock to exchange each share of Series B preferred stock
for 1.8 shares of the Company's common stock. The exchange offer is contingent
upon, and is expected to close concurrently with, the Company's public offering
(See Note I). The exchange will result in the issuance of 1,189,510 shares of
the Company's common stock.
NOTE H - 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.
No provision for income taxes has been recorded by the Company for the nine and
three months ended September 30, 1999 due to its incurring a net operating loss
for the 1999 period. A valuation allowance was provided for the amount of net
operating losses incurred in 1999.
NOTE I - Subsequent Events
--------------------------
On September 29, 2000, the Company filed a registration statement on Form S-1
with the Securities and Exchange Commission for a public offering of its common
stock. On October 23, 2000, the Company completed a private placement of
1,000,000 shares of common stock at $5.00 per share. Net proceeds from the
private placement amounted to $4,650,000 and will be used primarily to
accelerate the development of the Company's Burrwood and West Delta 83 fields.
An affiliate of a member of the Company's board of directors received $250,000
in compensation for its service in placing the shares in the private placement.
12
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
-----------------------------------
Nine months ended September 30, 2000 versus nine months ended September 30, 1999
--------------------------------------------------------------------------------
Total revenues for the nine months ended September 30, 2000 amounted to
$20,038,000 and were $10,635,000 higher than the $9,403,000 for the nine months
ended September 30, 1999 due to higher oil and gas sales. Oil and gas sales were
$19,656,000 for the first nine months of 2000 compared to $9,199,000 for the
first nine months of 1999, or $10,457,000 higher due to increased production
volumes and higher oil and gas prices. Oil and gas sales were reduced by
$1,763,000 in the nine months ended September 30, 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.
<TABLE>
<CAPTION>
Nine months Nine months
ended September 30, 2000 ended September 30, 1999
------------------------ ------------------------
Production Average Price Production Average Price
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Gas (Mcf)........... 2,453,378 $ 3.57 2,239,634 $ 2.25
Oil (Bbls).......... 435,607 $ 25.02 287,159 $ 14.47
</TABLE>
Lease operating expense and production taxes were $5,001,000 for the nine months
ended September 30, 2000, versus $2,008,000 for the nine months ended September
30, 1999, or $2,993,000 higher due primarily to higher oil and gas sales,
additional costs associated with the Company's Lafitte and Burrwood/West Delta
83 Field acquisitions and higher lease operating costs associated with certain
mature oil and gas fields. Depletion, depreciation and amortization was
$4,227,000 for the nine months ended September 30, 2000, versus $3,550,000 for
the nine months ended September 30, 1999, or $677,000 higher due to increased
capitalized costs and higher production volumes in the nine months ended 2000
versus 1999.
Exploration expense for the nine months ended September 30, 2000 was $2,084,000
versus $1,295,000 for the same period of 1999 or $789,000 higher due primarily
to seismic costs of $796,000 in the current period compared to $51,000 the same
period of 1999. Additionally, leasehold amortization and dry hole costs amounted
to $763,000 and $158,000 respectively, for the nine months ended September 30,
2000 versus $841,000 and $68,000 for the same period in 1999.
Interest expense was $3,416,000 in the nine months ended September 30, 2000
compared to $1,678,000 in the nine months ended September 30, 1999, or
$1,738,000 higher due to higher average debt outstanding debt for the nine
months ended September 30, 2000. The 2000 amount includes $845,000 of non cash
expenses associated with the amortization of financing costs and detachable
13
<PAGE>
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 $1,711,000 in the nine months
ended September 30, 2000 versus $1,617,000 in the nine months ended September
30, 1999.
The Company recorded a gain of $307,000 on the sale of certain non-core oil and
gas properties of $307,000 for the nine months ended September 30, 2000. The
Company incurred a loss on the sale of marketable equity securities of $519,000
for the nine months ended September 30, 1999.
On September 29, 2000, the Company paid an aggregate of approximately $1.8
million of dividend arrearages and $296,000 of regular quarterly dividends on
its outstanding series of preferred stock. These payments brought the Company
current as to dividends on both series of preferred stock.
Three months ended September 30, 2000 versus three months
ended September 30,1999
--------------------------------------------------------------------------------
Total revenues for the three months ended September 30, 2000 amounted to
$8,686,000 and were $5,054,000 higher than the $3,632,000 for the three months
ended September 30, 1999 due to higher oil and gas sales. Oil and gas sales were
$8,590,000 for the quarter ended September 30, 2000 due to increased production
volumes and higher oil and gas prices. Oil and gas sales were reduced by
$725,000 in the three months ended September 30, 3000 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.
<TABLE>
<CAPTION>
Three months Three months
ended September 30, 2000 ended September 30, 1999
Production Average Price Production Average Price
<S> <C> <C> <C> <C>
Gas (Mcf)........ 964,317 $ 4.17 675,215 $ 2.96
Oil (Bbls)....... 173,582 $ 26.33 83,833 $ 19.00
</TABLE>
Lease operating expense and production taxes were $1,956,000 for the three
months ended September 30, 2000, versus $640,000 for the three months ended
September 30, 1999, or $1,316,000 higher due primarily to higher oil and gas
sales, additional costs associated with the Company's Lafitte and Burrwood/West
Delta 83 Field acquisitions and higher lease operating costs associated with
certain mature oil and gas fields. Depletion, depreciation and amortization was
$1,659,000 for the three months ended September 30, 2000, versus $1,083,000 for
the three months ended September 30, 1999, or $576,000 higher due to increased
capitalized costs and higher production volumes in the current period compared
to the prior period.
14
<PAGE>
The Company incurred $1,358,000 of exploration expense in the third quarter of
2000, compared to $473,000 in the third quarter of 1999, or $885,000 higher
primarily due to seismic costs of $792,000 in the third quarter of 2000 versus
$22,000 in 1999. Additionally, dry hole costs amounted to $158,000 in the third
quarter of 2000 compared to $98,000 for the same period in 1999.
Interest expense was $1,024,000 in the three months ended September 30, 2000
compared to $596,000 in the third quarter of 1999 due to higher average debt
outstanding in the 2000 period. The 2000 amount includes $203,000 of 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 $514,000 in the three months
ended September 30, 2000 versus $492,000 in the third quarter of 1999.
Liquidity and Capital Resources
-------------------------------
Net cash provided by operating activities was $9,480,000 in the nine months
ended September 30, 2000 compared to net cash used in operating activities of
$1,075,000 in the nine months ended September 30, 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 $11,522,000 for the nine months
ended September 30, 2000 compared to $5,341,000 in 1999. 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 sale of oil and gas properties of $460,000. The nine months
ended September 30, 1999 reflects capital expenditures totaling $1,826,000, cash
paid in connection with the acquisition of oil and gas properties of $3,719,000,
and proceeds from the sales of marketable equity securities of $240,000.
Net cash used in financing activities was $1,856,000 for the nine months ended
September 30, 2000 as compared to net cash provided by financing activities of
$12,366,000 in the prior year period. 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 and
director options of $249,000 and the exercise of employee stock purchase
warrants and options of $452,000. The 2000 amount also includes production
payments of $453,000 and payment of debt financing costs of $30,000. The 1999
amount includes proceeds from the issuance of convertible notes of $12,000,000
and proceeds from the issuance of preferred stock of $3,000,000. The amount also
includes debt financing costs of $1,134,000 and pay downs of $1,500,000 by the
Company under its line of credit.
15
<PAGE>
The Company's current liabilities exceeded its current assets at September 30,
2000 by $3,063,000, which includes anticipated principle reductions on its
credit facility of $3,600,000. Current liabilities also include the estimated
current portion of production payments to be netted from the Company's Lafitte
field production. Based on operating cash flow and alternative sources for
funding capital expenditures, including the October 23, 2000 private placement
of common stock, the Company expects to be able to meet its current obligations
as they become due.
Compass Credit Facility
-----------------------
The Compass credit facility provides for a Borrowing Base of $27,100,000 with
continued monthly reductions of $300,000, until November 1, 2001, as amended on
November 1, 2000. On September 30, 2000, the amount outstanding under the credit
facility was $23,865,000. The maturity date for amounts drawn under the bank
credit facility is November 1, 2001. Interest on the credit facility is the
Compass Bank Index Rate plus 5/8%. The revised credit facility requires the net
proceeds of asset sales be used to extinguish outstanding principle and interest
under the borrowing base. Substantially all of the Company's assets are pledged
to secure this credit facility.
Capital Expenditures
--------------------
The Company had $10,783,000 in capital expenditures in the nine months ended
September 30, 2000. The Company anticipates that total capital expenditures for
2000 will approximate $15,000,000 and has revised its 2000 capital expenditure
budget accordingly. Such budget is under constant review during the year and
could change due to actual and estimated cash flow, commodity prices, business
opportunities and other factors. The Company expects to fund capital
expenditures for the remainder of 2000 from operating cash flow, cash and 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 has been operating pursuant to a business plan that has been
approved by the New York Stock Exchange. The Company has made substantial
progress toward meeting the Exchange's continued listing requirements and the
Exchange continues to monitor the Company's progress on a quarterly basis. The
short-term nature of the time frame required for the Company to become compliant
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.
16
<PAGE>
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. A derivative instrument 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 or other comprehensive income, as
appropriate, as the cumulative effect of a change in accounting principle. 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
----------------------------------------------------------
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, 2000 a hypothetical 2% change in the interest rates would
increase annual interest expense by approximately $477,000.
Hedging Activity
----------------
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. 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
17
<PAGE>
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 September 30, 2000, the Company's open forward position on its outstanding
crude oil hedging contracts 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;
(c) 500 barrels of oil per day with a no cost "collar" of $25.00 to $32.44 per
day beginning October 2000 through December 2000;
(d) 500 barrels of oil per day with a no cost "collar" of $20.00 and $28.40 per
barrel beginning January, 2001 through December 2001; and
(e) 300 barrels of oil per day with a no cost "collar" of $23.00 and $29.55 per
barrel beginning January 2001 through December 2001.
At September 30, 2000, the Company's average price on its outstanding crude oil
hedging contracts was $26.95. The fair value of the crude oil hedging contracts
in place at September 30, 2000 resulted in a liability of $496,000.
As of September 30, 2000, the Company's open forward position on its outstanding
natural gas hedging contracts was as follows:
(a) 6,500 MMBtu of gas per day with a no cost "collar" of $3.70 and $4.53 per
MMBtu beginning October 2000 through December 2000; and
(b) 5,000 MMBtu of gas per day with a no cost "collar" of $3.05 and $4.45 per
MMBtu beginning January 2001 through December 2001.
At September 30, 2000, the average price on its outstanding gas hedging
contracts was $4.50. The fair value of the natural gas hedging contracts in
place at September 30, 2000 resulted in a liability of $970,000.
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.
18
<PAGE>
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.
19
<PAGE>
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
27 - Financial Data Schedule
20
<PAGE>
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
21
<PAGE>
