<PAGE>
As filed with the Securities and Exchange Commission on January 8, 2001
Registration No. 333-47078
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
Goodrich Petroleum Corporation
(Name of registrant as specified in its charter)
----------------
Delaware 1311 76-0466193
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification No.)
of incorporation or Classification Code
organization) Number)
815 Walker, Suite 1040
Houston, Texas 77002
(713) 780-9494
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------
Robert C. Turnham, Jr.
Executive Vice President and Chief Operating Officer
815 Walker, Suite 1040
Houston, Texas 77002
(713) 780-9494
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------
Copy to:
James M. Prince
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002-6760
(713) 758-2222
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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--------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, dated January 8, 2001
3,000,000 Shares
[Goodrich Logo appears here]
Common Stock
-----------
We are offering for sale 3,000,000 shares of our common stock. The common
stock is being sold by us directly to the public. We may place some of the
shares to be sold through placement agents who will receive customary
commissions. See "Plan of Distribution."
Our common stock is listed on the New York Stock Exchange under the trading
symbol GDP. On January 5, 2001, the last reported sales price of our common
stock was $5.25 per share.
-----------
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 7.
-----------
<TABLE>
<CAPTION>
Price
to Proceeds to
Public Goodrich(1)
------- -----------
<S> <C> <C>
Per Share.......................................... $ $
Total.............................................. $ $
</TABLE>
-----
(1) Before deducting any commissions paid to placements agents. See "Plan
of Distribution."
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
We expect to deliver the common stock to purchasers on or about , 2001.
-----------
The date of this prospectus is , 2001
<PAGE>
Goodrich Petroleum Corporation
South Louisiana Focus
[Map of our core operating area with detail on our near-term projects]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................................................... 1
Risk Factors............................................................... 7
Forward-Looking Statements................................................. 13
Use of Proceeds............................................................ 15
Price Range of Common Stock................................................ 15
Dividend Policy............................................................ 16
Capitalization............................................................. 17
Dilution................................................................... 18
Selected Consolidated Financial Data....................................... 19
Pro Forma As Adjusted Financial Data....................................... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................................................ 24
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business and Properties.................................................... 32
Management................................................................. 45
Transactions with Our Management and Securityholders....................... 52
Principal Stockholders..................................................... 53
Description of Capital Stock............................................... 56
Plan of Distribution....................................................... 61
Legal Matters.............................................................. 63
Independent Accountants.................................................... 63
Independent Petroleum Engineers............................................ 63
Where You Can Find More Information........................................ 63
Glossary of Technical Terms................................................ 64
Index to Financial Statements.............................................. F-1
</TABLE>
----------------
You should rely only on the information contained in this prospectus or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This prospectus may only be used where it is
legal to sell these securities.
----------------
<PAGE>
PROSPECTUS SUMMARY
You should carefully read the entire prospectus, especially the risks of
investing in the common stock discussed under "Risk Factors" and the financial
statements and notes thereto. In this prospectus, the terms "Goodrich," "we,"
"our" and "us" and other similar terms refer to Goodrich Petroleum Corporation,
including our consolidated subsidiaries, members of our senior management and,
where appropriate, our predecessor, Patrick Petroleum Corporation. The term
"you" refers to a prospective investor. We have included definitions of
technical terms important to an understanding of our business under "Glossary
of Technical Terms" on page 64. Unless otherwise indicated, all financial and
quantitative information that we provide in this prospectus on a pro forma as
adjusted basis gives effect, on the date and for the periods indicated, to the
completion of this offering, the conversion of our subsidiaries' notes into
shares of our common stock, our most recent private placement and the exchange
of our Series B preferred stock for shares of our common stock.
Goodrich Petroleum Corporation
We are an independent oil and natural gas company engaged in the
exploration, exploitation, development and production of oil and natural gas
properties in the transition zone of south Louisiana and in north Louisiana,
the Gulf Coast of Texas and East Texas. We have been active in these regions
since 1975 and have established extensive technical and operating expertise in
all of our areas of geographic focus. At June 30, 2000, we had net proved
reserves of 71.0 Bcfe with a pre-tax PV-10 Value of $153.7 million and an
after-tax Standardized Measure value of $116.2 million.
We have an inventory of over 100 development, exploitation and exploration
projects that we believe provides us with an opportunity to substantially
increase our production and reserves. Our Burrwood, West Delta and Lafitte
fields account for approximately 80% of our 2001 capital budget of $20.0
million. Our production has already increased 67% to 2.0 Bcfe in the third
quarter of 2000 from 1.2 Bcfe in the third quarter of 1999. There can be no
assurance that we will be able to achieve additional production increases.
Our Strategy
Our principal strategy is to increase production, cash flow and reserves
through the acquisition and subsequent exploitation and development of mature
properties, complimented by select exploration activities, in our core areas.
We focus on fields that have multiple productive reservoirs with an established
production history and infrastructure in place. Other elements of our near-term
strategy include:
Aggressively Develop Our Burrwood, West Delta and Lafitte Fields. We plan to
pursue 92 development and exploitation projects in our Burrwood, West Delta and
Lafitte fields, 80% of which are scheduled for the next two years. This
development and exploitation activity is already underway and will be
accelerated with the liquidity we gain from this offering. In addition, we
expect to complete a 41 square mile 3-D seismic survey over our Burrwood and
West Delta fields by June 2001.
Maintain Our Focus on South Louisiana. We will continue to concentrate our
activities in our core areas, primarily the transition zone of south Louisiana.
We have assembled a large inventory of technical data and expertise over the
last 25 years, resulting in an approximate 70% drilling success rate and the
achievement of production in over 70 fields in Louisiana. Over 78% of our
proved reserves are in south Louisiana and more than 95% of our 2001 capital
budget is dedicated to development and exploitation activities in this region.
Maintain Significant Operatorship. We currently operate 65% of our
properties, providing us with control over the planning, incurrence and timing
of many capital and operating expenditures. As operator of the Burrwood and
West Delta fields, we intend to use the liquidity that we gain from this
offering to accelerate the development and exploitation projects within these
fields.
Repeat Our Recent Acquisition Success. We recently acquired our interests in
the Burrwood, West Delta and Lafitte fields for an aggregate purchase price of
$10.1 million. Based on independent reserve engineering estimates and factoring
in the estimated capital expenditures to develop these reserves, we estimate an
all-in finding and development cost of $0.71 per Mcfe for these properties.
Since closing these acquisitions, we have increased production of oil and
natural gas at Lafitte by 100% to approximately 9,000 gross Mcfe per day and
1
<PAGE>
at Burrwood and West Delta by 144% to approximately 11,000 gross Mcfe per day.
These production increases, when coupled with additional production increases
achieved in other fields, have allowed us to increase net daily production from
approximately 12,800 Mcfe per day one year ago to approximately 22,000 Mcfe per
day currently.
We believe there will continue to be attractive opportunities to acquire
properties in our core areas as major and large independent oil and natural gas
companies continue to focus their resources away from mature properties in
south Louisiana to the development of projects in the deep water Gulf of Mexico
and in foreign countries.
Recent and Pending Transactions
We have consummated several significant financial and acquisition
transactions this year and will close several additional financial transactions
in connection with the completion of this offering:
Amendment of Our Credit Agreement. Prior to the closing of this offering, we
will amend our credit agreement with Compass Bank to increase the size of our
credit facility to $50.0 million, with an initial borrowing base of $30.0
million. We expect to repay a portion of the amounts currently outstanding
under our credit facility with the proceeds of this offering, resulting in
initial availability of approximately $20.0 million under the amended facility.
Private Placement of $5.0 Million of Common Stock. On September 28, 2000, we
received irrevocable commitments to purchase 1,000,000 shares of our common
stock. In October 2000, we completed the sale of these shares for gross
proceeds of $5.0 million. The placement of the common stock was arranged by
Hambrecht & Quist Guaranty Finance L.L.C.
Payment of Dividend Arrearages and Reinstatement of Dividends on Our
Preferred Stock. In September 2000, we paid an aggregate of approximately $1.8
million of dividend arrearages and $296,000 of regular quarterly dividends on
our Series A and Series B preferred stock. These payments, including the
dividends declared and paid in December, brought us current on our dividend
payments on both of our series of preferred stock.
Exchange of Preferred Stock for Common Stock. We have reached agreement with
all of the holders of our Series B preferred stock to exchange each share of
Series B preferred stock for 1.8 shares of our common stock. The exchange offer
is contingent upon and will close concurrently with this offering. We will
issue 1,189,510 shares of our common stock as a result of the exchange. We
believe that this transaction and the payment of dividend arrearages mentioned
above will strengthen and simplify our balance sheet by eliminating both the
ongoing dividend burden and approximately $6.6 million of liquidation
preference associated with the Series B preferred stock as of December 31,
2000.
Conversion of Our Subsidiaries' Notes. In August 2000, we issued 3,295,647
shares of our common stock in connection with the conversion of convertible
notes issued by two of our subsidiaries. The convertible notes had outstanding
principal and accrued interest of $12.9 million at the time of conversion.
Acquisition of Burrwood and West Delta Fields. In March 2000, we completed
the acquisition of working interests in the Burrwood and West Delta fields for
$1.2 million cash, the assumption of the plugging and abandonment obligations
associated with these fields, which we have estimated to be $4.75 million, and
the commitment to conduct a 3-D seismic survey by June 2001, which will cost us
$2.4 million. These contiguous fields collectively comprise approximately 8,600
gross acres in Plaquemines Parish, Louisiana. At the time of the acquisition,
the Burrwood and West Delta fields had cumulative production of 431 Bcfe, 16
productive reservoirs above 10,600 feet, significant existing infrastructure,
immediate development opportunities and potential deep reservoirs that we
believe may be identified with the use of 3-D seismic technology. The Burrwood
and West Delta fields are near several fields that have yielded substantial
production from wells drilled below 10,600 feet.
Private Placement of $4.5 Million of Common Stock. In February 2000, we
completed a private placement of 1,533,333 shares of our common stock to an
investor group led by Hambrecht & Quist Guaranty Finance L.L.C. We used the
$4.5 million in gross proceeds for the acquisition of our interests in and
initial development of the Burrwood and West Delta fields and further
development of the Lafitte field.
2
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by us,
excluding underwriters' over-
allotment option................. 3,000,000 shares.
Common stock outstanding after
this offering.................... 17,508,430 shares.
Use of proceeds................... We intend to use the proceeds from this
offering to repay a portion of our
borrowings under our bank credit facility.
We intend to invest our operating cash flow
and reborrow funds under our bank credit
facility to accelerate our capital
expenditures for development and
exploitation activities in south Louisiana,
with a particular focus on our Burrwood,
West Delta and Lafitte fields. See "Use of
Proceeds."
NYSE symbol....................... GDP.
</TABLE>
The number of shares of common stock to be outstanding after this offering
includes 1,189,510 shares to be issued in exchange for our Series B preferred
stock but excludes 791,813 shares of common stock issuable upon exercise of
outstanding options at a weighted average exercise price of $4.35 per share and
3,387,978 shares issuable upon exercise of outstanding warrants at a weighted
average exercise price of $1.05 per share, as of December 31, 2000.
3
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share data)
The following table sets forth some of our historical and pro forma as
adjusted consolidated financial data. You should read the following data in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements included
in this prospectus. The summary financial and other data as of, and for the
years ended, December 31, 1997, 1998 and 1999 has been derived from our audited
financial statements included in this prospectus. The summary financial and
other data as of September 30, 2000 and for the nine months ended September 30,
1999 and 2000 has been derived from our unaudited financial statements included
in this prospectus. The summary unaudited pro forma as adjusted statement of
operations and other data illustrates the impact of this offering, the
conversion of our subsidiaries' notes into shares of our common stock in August
2000, our most recent private placement and the exchange of our Series B
preferred stock for common stock, as if these transactions were consummated as
of January 1, 1999, while the summary unaudited pro forma as adjusted balance
sheet data as of September 30, 2000 gives effect to such transactions as if
they had occurred on such date unless such transactions actually occurred prior
to such date. The summary unaudited pro forma as adjusted financial data is not
necessarily indicative of the results that would have occurred had these
transactions been consummated as of the beginning of the periods presented.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
-------------------------------------- -----------------------------
Pro Forma Pro Forma
As Adjusted As Adjusted
1997 1998 1999 1999 1999 2000 2000
------- ------- ------- ----------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $12,901 $10,592 $14,020 $14,020 $ 9,403 $20,038 $20,038
Expenses:
Lease operating
expenses and
production taxes...... 2,316 2,822 3,591 3,591 2,008 5,001 5,001
Depreciation,
depletion and
amortization.......... 4,863 4,094 4,744 4,744 3,550 4,227 4,227
Exploration............ 3,206 6,010 1,656 1,656 1,295 2,084 2,084
Impairment of oil and
natural gas
properties............ 550 1,076 465 465 -- -- --
Interest............... 1,416 1,910 2,811 2,308 1,678 3,696 2,065
General and
administrative........ 2,627 2,399 1,990 1,990 1,617 1,712 1,712
Preferred dividend
requirements of a
subsidiary(1)......... -- -- 73 73 -- 38 38
------- ------- ------- ------- ------- ------- -------
Total costs and
expenses............ 14,978 18,311 15,330 14,827 10,148 16,758 15,127
------- ------- ------- ------- ------- ------- -------
Gain (loss) on sale of
assets................ 688 4 (519) (519) (519) 307 307
------- ------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... (1,389) (7,715) (1,829) (1,326) (1,264) 3,587 5,218
Income tax
benefit(2)............ -- -- -- -- -- (1,655) (1,655)
------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $(1,389) $(7,715) $(1,829) $(1,326) $(1,264) $ 5,242 $ 6,873
Preferred stock
dividends.............. 1,205 1,256 1,249 637 942 887 478
------- ------- ------- ------- ------- ------- -------
Net income (loss)
applicable to common
stock.................. $(2,594) $(8,971) $(3,078) $(1,963) $(2,206) $ 4,355 $ 6,395
======= ======= ======= ======= ======= ======= =======
Basic income (loss) per
common share........... $ (0.50) $ (1.71) $ (0.58) $ (0.14) $ (0.42) $ 0.49 $ 0.38
======= ======= ======= ======= ======= ======= =======
Diluted income (loss)
per common share....... $ (0.50) $ (1.71) $ (0.58) $ (0.14) $ (0.42) $ 0.35 $ 0.32
======= ======= ======= ======= ======= ======= =======
Average common shares
outstanding--basic..... 5,229 5,243 5,288 13,773 5,262 8,873 16,829
======= ======= ======= ======= ======= ======= =======
Average common shares
outstanding--diluted... 5,229 5,243 5,288 13,773 5,262 15,050 20,240
======= ======= ======= ======= ======= ======= =======
Other Data:
Adjusted EBITDA(3)...... $ 7,958 $ 5,371 $ 8,366 $ 8,366 $ 5,778 $13,287 $13,287
Net cash provided by
(used in) operating
activities............. 6,633 4,517 1,065 N/A (1,075) 9,480 N/A
Net cash provided by
(used in) investing
activities............. (6,007) (14,959) (6,407) N/A (5,341) (11,522) N/A
Net cash provided by
(used in) financing
activities............. (177) 9,744 11,176 N/A 12,366 (1,856) N/A
Capital
expenditures(4)........ 9,941 15,008 6,657 N/A 5,581 11,982 N/A
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
At September 30,
2000
-------------------
Pro Forma
Actual As Adjusted
------- -----------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents(5).............................. $ 2,030 $ 20,330
Net property and equipment (successful efforts method)
(6)...................................................... 52,162 52,162
Total assets.............................................. 63,259 81,559
Current portion of long-term debt(5)...................... 3,600 3,600
Long-term debt(5)......................................... 20,265 20,265
Total stockholders' equity................................ 27,697 45,997
</TABLE>
--------
(1) In February 2000, all of the holders of the preferred units of our
subsidiary converted their preferred units into 1,533,333 shares of our
common stock.
(2) We recorded a net deferred tax asset of $1.6 million in the nine months
ended September 30, 2000 based on projections for generating sufficient
taxable income prior to expiration of our net operating loss carryforwards.
For the prior periods, we had no income tax provision due to the generation
of net operating loss carryforwards or the use of available net operating
loss carryforwards to offset taxable income. Valuation allowances were
established for the net operating loss carryforwards based on the evidence
considered in the assessment of the likelihood of utilizing the net
operating loss carryforwards.
(3) Adjusted EBITDA means earnings before interest, income taxes, depreciation,
depletion and amortization, impairment of oil and natural gas properties,
gains or losses on sales of assets and exploration expense. Adjusted EBITDA
is not a calculation based on generally accepted accounting principles.
Adjusted EBITDA should not be considered as an alternative to net income as
an indicator of our operating performance, or as an alternative to cash
flow as a better measure of liquidity. Our Adjusted EBITDA calculation may
not be comparable to other similarly titled measures reported by other
companies. We have presented Adjusted EBITDA because of its wide acceptance
as a financial indicator and usefulness in assessing our funds available to
finance our activities.
(4) We include our acquisitions of oil and natural gas properties within this
classification.
(5) As described in "Use of Proceeds," we intend to use the proceeds from this
offering to repay a portion of the borrowings outstanding under our bank
credit facility. Because we expect to reborrow under this facility to
finance our 2001 capital expenditure program, we have not eliminated such
borrowings in our pro forma as adjusted financial statements. We have,
however, shown the near term effect of this offering on our indebtedness
under "Capitalization."
(6) Net of depreciation, depletion and amortization associated with such
property and equipment.
5
<PAGE>
Summary Reserve Information
The table below presents our summary reserve information as of June 30,
2000. Estimates of our net proved reserves are based on a reserve report
prepared by Coutret & Associates, Inc., our independent reserve engineers. For
additional information relating to our oil and natural gas reserves, please
read "Business and Properties--Oil and Natural Gas Operations and Properties,"
"--Oil and Natural Gas Reserves" and note P of the notes to our consolidated
financial statements included in this prospectus.
<TABLE>
<CAPTION>
June 30, 2000
-------------
<S> <C>
Estimated net proved reserves:
Natural gas (MMcf)......................................... 30,743
Oil and condensate (MBbls)................................. 6,703
Total (MMcfe)............................................ 70,961
PV-10 Value(1) (in thousands).............................. $153,712
Standardized Measure(1) (in thousands)..................... $116,195
Proved developed reserves as percentage of total proved
reserves.................................................. 66.3%
</TABLE>
--------
(1) The present value of future net cash flows attributable to our proved
reserves, determined, in the case of PV-10 Value, on a pre-tax basis and,
in the case of Standardized Measure, on an after-tax basis, using prices
and costs in effect at June 30, 2000 and discounted at 10% per annum, was
calculated by using the weighted average June 30, 2000 prices received at
the wellhead of $4.56 per Mcf of natural gas and $29.80 per Bbl of oil.
Summary Operating Data
<TABLE>
<CAPTION>
Nine
Months Ended
Year Ended December 31, September 30,
------------------------- -------------
1997 1998 1999 1999 2000
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Production:
Natural gas (MMcf).................. 2,449 2,783 2,931 2,240 2,453
Oil and condensate (MBbls).......... 282 317 394 287 436
Total (MMcfe)..................... 4,144 4,683 5,297 3,963 5,067
Average sales price per unit:
Natural gas--
Revenues from production (per
Mcf)............................. $ 2.55 $ 2.18 $ 2.40 $ 2.25 $ 3.66
Effects of hedging activities (per
Mcf)............................. -- -- 0.01 -- (0.09)
------- ------- ------- ------ ------
Average price (per Mcf)........... $ 2.55 $ 2.18 $ 2.41 $ 2.25 $ 3.57
------- ------- ------- ------ ------
Oil and condensate--
Revenues from production (per
Bbl)............................. $ 18.06 $ 11.88 $ 16.88 $14.47 $28.56
Effects of hedging activities (per
Bbl)............................. -- -- -- -- (3.54)
------- ------- ------- ------ ------
Average price (per Bbl)........... $ 18.06 $ 11.88 $ 16.88 $14.47 $25.02
------- ------- ------- ------ ------
Total revenues from production (per
Mcfe).............................. $ 2.74 $ 2.10 $ 2.58 $ 2.32 $ 4.23
Effects of hedging activities (per
Mcfe).............................. -- -- 0.01 -- (0.35)
------- ------- ------- ------ ------
Total average price (per Mcfe).... $ 2.74 $ 2.10 $ 2.59 $ 2.32 $ 3.88
======= ======= ======= ====== ======
Expenses (per Mcfe):
General and administrative.......... $ 0.63 $ 0.51 $ 0.38 $ 0.41 $ 0.34
Lease operating expenses (excluding
production taxes).................. 0.40 0.48 0.51 0.37 0.67
Production taxes.................... 0.16 0.13 0.17 0.13 0.32
Depreciation, depletion and
amortization-oil and natural gas
properties......................... 1.17 0.87 0.89 0.90 0.83
Reserve life index (in years)(1).... 15.0x 10.0x 12.7x N/A N/A
</TABLE>
--------
(1) Calculated by dividing period-end proved reserves by production for the
prior fiscal year. Our 1999 reserves include the Burrwood and West Delta
acquisitions on a pro forma basis.
6
<PAGE>
RISK FACTORS
An investment in our common stock involves risks. You should carefully
consider the following risks and other information in this prospectus before
deciding to invest in our common stock. The trading price of our common stock
could decline as a result of these risks, in which case you could lose all or
part of your investment.
Risks Related to Our Business
We have a history of losses and may not be profitable in the future.
We may not be profitable in the future. We have had losses from January 1,
1997 through March 31, 2000. As of September 30, 2000, the net losses
applicable to common stock from January 1997 totaled approximately $10.3
million. Our ability in future years to achieve profitability will depend on
our oil and natural gas production, the success of our projects, commodity
prices and expenses. If we are not profitable in the future, the market price
of our common stock may decline and the value of your investment may be
adversely affected.
The size of our balance sheet or volatility in our results may prevent us from
raising the capital necessary to make acquisitions and drill wells.
We may not be able to successfully pursue our business strategy if the size
of our balance sheet, volatility in our results or general industry or market
conditions prevents us from raising the capital required for operations. We
make, and will continue to make, substantial expenditures for the acquisition,
exploration, exploitation, development and production of oil and natural gas
reserves. We have had to adjust our capital spending in the past to reflect the
lack of available capital, particularly in 1999. If our revenues or cash flow
from operations decrease as a result of lower oil and natural gas prices,
operating difficulties or other factors, many of which are beyond our control,
or we are unable to raise additional debt or equity proceeds to fund such
expenditures, then we may curtail our drilling, development and other
activities or be forced or choose to sell some of our assets on an untimely or
unfavorable basis, any of which may have a material adverse affect on our
business, financial condition, results of operations or cash flows. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business and Properties--
Capital Expenditures."
We expect to incur substantial debt. If we are unable to service this debt or
if we are restricted by this debt from engaging in certain activities, our
business may be materially adversely affected.
Any inability on our part to service our debt will be materially adverse to
our business. We have incurred substantial debt, and expect to incur additional
debt in the future, in connection with our capital expenditures. Though we
intend to use the proceeds of this offering to repay a substantial portion of
our outstanding debt, we also expect to borrow additional funds in the future
under our bank credit facility. Such additional borrowings may severely
restrict our exploration and development activities.
As our level of borrowings increases, such indebtedness may have several
important effects on our operations, including:
. a substantial portion of our cash flow from operations may be dedicated
to the payment of interest and principal on our indebtedness and will
not be available for other purposes;
. the covenants contained in our bank credit facility limit our ability to
borrow additional funds or to dispose of assets and may affect our
flexibility in planning for, and reacting to, changes in business
conditions;
. our ability to obtain additional financing in the future for working
capital, capital expenditures (including acquisitions), general
corporate purposes or other purposes may be impaired;
7
<PAGE>
. our leveraged financial position may make us more vulnerable to economic
downturns and may limit our ability to withstand sustained declines in
oil and natural gas prices;
. such borrowings will be subject to variable rates, which may make us
vulnerable to increases in interest rates; and
. our flexibility in planning for or reacting to changes in market
conditions may be limited.
Moreover, future acquisition or development activities may require us to
alter our capitalization significantly. These changes in capitalization may
significantly increase our leverage. Our ability to continue to meet our debt
service obligations, to reduce total indebtedness and to meet our other
obligations will be dependent upon our future performance, which will be
subject to general economic conditions, including oil and natural gas prices,
and to financial, business and other factors affecting our operations, many of
which are beyond our control. If we are unable to generate sufficient cash flow
from operations in the future to meet these commitments, we may not be able to
satisfy our capital requirements unless we are able to successfully adopt one
or more alternatives on a timely basis and with satisfactory terms, such as
refinancing or restructuring our indebtedness, selling material assets or
operations or seeking to raise additional debt or equity capital. The terms of
our indebtedness, including the bank credit facility, also may prohibit us from
taking such actions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--Bank
Credit Facility."
We could lose our listing on the New York Stock Exchange, which may have a
materially adverse effect on the market price and marketability of our common
stock.
The price and marketability of our common stock could be materially
adversely affected if we lose our NYSE listing. In July 1999, we were informed
by the NYSE that we were not in compliance with its revised minimum financial
criteria for continued listing on the exchange. We currently are not in
compliance with the NYSE's requirement for a minimum of a $50.0 million book
capitalization requirement. This offering does not raise sufficient funds for
us to meet the book equity requirement; therefore, the NYSE may delist our
stock, which would adversely affect the liquidity and market price of our
common stock.
If we are unable to resolve our dispute with the co-owner of the Lafitte field,
our development of this property may be materially adversely affected.
Our development of the Lafitte field will be hindered if we are unable to
resolve our dispute with the co-owner. We jointly acquired our interest in the
Lafitte field with Stone Energy Corporation. We have been in a dispute with
Stone regarding our respective rights and obligations under the agreements
associated with the joint acquisition. We believe that our agreements with
Stone provide us with an opportunity to more fully evaluate the field than we
are currently allowed to do. In February 2000, we filed two lawsuits against
Stone alleging misconduct and violation of the agreements associated with the
joint acquisition. Until this dispute is resolved, our ability to fully
evaluate and develop our interests in new wells could be seriously hindered.
Our hedging activities may reduce our revenues in a rising commodity price
environment or result in losses.
Our hedging arrangements may reduce the amount of revenues we receive from
our oil and gas production. We have hedged approximately 54% of our current
daily production for the fourth quarter of this year. We also have hedges in
place for 2001 which equal approximately 47% of our current daily production.
By replacing the right to receive the market price for our production with a
right to receive the fixed or collared hedge price, hedging will prevent us
from receiving the full advantage of increases in oil and natural gas prices
above the fixed or collared amount specified in the hedge. In addition,
significant reductions in our production at times when the market price exceeds
the price fixed in the hedge agreements could require us to make payments under
our hedge agreements even though such payments are not offset by sales of our
production. We
8
<PAGE>
may also have margin calls if the market moves in opposite directions from our
hedged positions. The occurrence of any such event could have a material
adverse effect on our business, financial condition, results of operations or
cash flows. For further discussion of our hedging arrangements, please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quantitative and Qualitative Disclosures About Market Risk--Hedging
Activity."
Most of the outstanding shares of our common stock will be eligible for sale
immediately after this offering. If substantial volumes of these shares are
offered for sale, the market price of our common stock could be adversely
affected.
The price of our common stock may be adversely affected because of the
significant number of shares eligible for sale in the future. We will have
17,508,430 shares outstanding after giving effect to this offering and the
other transactions described in this prospectus. In addition, as of December
31, 2000, we had outstanding warrants to purchase 3,387,978 shares of common
stock at a weighted average exercise price of $1.05 per share and outstanding
options to purchase 791,813 shares of our common stock at a weighted average
exercise price of $4.35 per share, of which 49,063 are currently vested.
We, along with our officers and directors have agreed to not offer, sell,
grant any option (except pursuant to stock option plans) to purchase or
otherwise dispose of a total of 4,638,112 shares beneficially held by any of us
during the 180 days following the sale of the shares in the offering without
prior consent. Pursuant to SEC short-swing trading rules, H&Q Guaranty is
restricted from selling its directly-owned shares of our common stock prior to
February 2001. All of our other shares, including shares sold in this offering
or pursuant to the exercise of our warrants, will be freely tradeable
immediately after this offering.
You will experience immediate dilution of $2.83 in net tangible book value per
share from the price you pay in the offering in our book value per share.
Immediately after this offering, the public offering price of our common
stock will be substantially higher than the net tangible book value per share
of our outstanding common stock. Net tangible book value per share represents
the amount of total tangible assets less total liabilities, divided by the
number of shares outstanding. If you purchase our common stock in this
offering, you will incur immediate dilution of $2.83 in the net tangible book
value per share of common stock from the price you pay for our common stock in
this offering.
The small trading volume of our common stock may adversely affect the value of
your investment.
Although our common stock is listed on the NYSE, the public market for our
common stock has been relatively small. Stocks with small markets and limited
liquidity may experience fluctuations in their prices due to imbalances between
orders to buy and orders to sell the stock. The limited liquidity in our stock
may reduce the market value of our shares compared to comparable companies with
greater trading volumes.
Our success depends on our chief executive officer and other key executive
officers, the loss of whom could disrupt our business operations.
We depend to a large extent on the efforts and continued employment of our
President and Chief Executive Officer, Walter G. Goodrich, and our other
executive officers. We do not have employment agreements with these officers.
If Mr. Goodrich or these other executive officers resigns or becomes unable to
continue in his present role and if such person is not adequately replaced, our
business operations could be materially adversely affected.
We are subject to many environmental and safety regulations that may result in
unanticipated costs or liabilities.
Exploration for and development, production and sale of oil and natural gas
in the U.S. are subject to extensive and complex federal, state and local laws
and regulations, including environmental, health and safety
9
<PAGE>
laws and regulations. We may be required to make large expenditures to comply
with current and future regulations.
Under these laws and regulations, we could be liable for personal injuries,
property damage, oil spills, discharge of hazardous substances, remediation and
clean-up costs and other environmental damages. Failure to comply with these
laws and regulations also may result in the suspension or termination of our
operations and subject us to administrative, civil and criminal penalties. We
do not believe that full insurance coverage for all potential environmental
damages is available at a reasonable cost, and we do not have such coverage.
Accordingly, any of these liabilities, penalties, suspensions, terminations or
regulatory changes could materially adversely affect our business, financial
condition, results of operations or cash flows.
In addition, the U.S. Environmental Protection Agency has identified us as a
potentially responsible party for the cost of clean-up of hazardous substances
at an oil field waste disposal site in Vermilion Parish, Louisiana. We estimate
that the remaining cost of long-term clean-up of the site will be approximately
$3.5 million, with our percentage of responsibility estimated by the EPA to be
approximately 3.05%, which equates to an individual cost of about $107,000.
However, if the actual clean-up costs are higher or if other potentially
responsible parties fail to pay their allocation, then our costs for this site
could be significantly higher than the amount presently estimated or accrued
for this liability. In such an event, we may be required to reallocate our
capital resources to these clean-up costs, adversely affecting our planned
operations.
Oil and natural gas prices are volatile. Low prices could have a material
adverse effect on our business.
Our revenues, profitability and future growth depend substantially on
prevailing prices for oil and natural gas. Historically, prices for oil and
natural gas have been volatile and low prices have hurt our business. Among the
factors that can cause this fluctuation are:
. level of consumer product demand;
. weather conditions;
. domestic and foreign governmental regulations;
. price and availability of alternative fuels;
. political conditions in oil and natural gas producing regions;
. domestic and foreign supply of oil and natural gas;
. price of foreign imports; and
. overall economic conditions.
Prices for oil and natural gas affect the amount of cash flow available for
capital expenditures and our ability to borrow and raise additional capital.
The amount we can borrow under our bank credit facility is subject to periodic
redetermination based in part on changing expectations of future prices. Lower
prices may also reduce the amount of oil and natural gas that we can
economically produce. Any substantial and extended decline in the price of oil
or natural gas would have a material adverse effect on the carrying value of
our proved reserves, our borrowing capacity, our ability to obtain additional
capacity, and our business, financial condition, results of operations or cash
flows.
Our reserve estimates may prove to be inaccurate, which could materially affect
the quantities and present value of our estimated reserves.
Our reserve estimates may overstate our actual reserves and the value of
future production. The process of estimating oil and natural gas reserves is a
subjective process of estimating underground accumulations of oil and natural
gas that cannot be measured in an exact manner. It requires interpretations of
available technical data and various assumptions, including assumptions
relating to economic and other factors beyond our control. Any significant
inaccuracies in these interpretations or assumptions could materially affect
the estimated quantities and present value of reserves shown in this
prospectus.
10
<PAGE>
Actual future production, oil and natural gas prices, revenues, taxes,
development expenditures, operating expenses and quantities of recoverable oil
and natural gas reserves most likely will vary from our estimates. In addition,
we may adjust estimates of proved reserves to reflect production history,
results of exploration and development, availability of rigs and other
equipment, prevailing oil and natural gas prices and other factors, many of
which are beyond our control. At June 30, 2000, 33.7% of our proved reserves
were proved undeveloped. Most of our reserves are calculated using volumetric
analysis, and these estimates could be viewed as more subjective. Any such
inaccuracies could have a material adverse effect on our business, financial
condition, cash flows or results of operations.
You should not assume that the present value of future net cash flows from
our proved reserves referred to in this prospectus is the current market value
of our reserves. In accordance with SEC requirements, we base the estimated
discounted future net cash flows from our proved reserves on prices and costs
on the date of the estimate. Actual future prices and costs may differ
materially from those used in the present value estimate because of changes in
commodity prices or hedging transactions.
Exploration is a high-risk activity. The 3-D seismic data and other advanced
technologies we use cannot eliminate exploration risk and require experienced
technical personnel whom we may be unable to attract or retain.
Our future success will depend on the success of our drilling program.
Exploitation and exploration activities involve numerous risks, including the
risk that no commercially productive oil and natural gas reservoirs will be
discovered. In addition, we often are uncertain as to the future cost or timing
of drilling, completing and producing wells. Furthermore, our drilling
operations may be curtailed, delayed or canceled as a result of the additional
exploration, time and expenses associated with a variety of factors, including:
. unexpected drilling conditions;
. pressure or irregularities in formations;
. equipment failures or accidents;
. adverse weather conditions;
. compliance with governmental requirements; and
. shortages or delays in the availability of drilling rigs and the
delivery of equipment.
Even when used and properly interpreted, 3-D seismic data and visualization
techniques do not allow the interpreter to know conclusively if hydrocarbons
are present or economically producible. We could incur losses as a result of
these expenditures. Poor results from our exploitation and exploration
activities could have a material adverse effect on our business, financial
condition, cash flows or results of operations.
Our drilling success will depend, in part, on our ability to attract and
retain experienced explorationists and other professional personnel.
Competition for explorationists and engineers with experience is intense. If we
cannot retain our current personnel or attract additional experienced
personnel, our ability to compete could be adversely affected.
The failure to replace our reserves would adversely affect our production and
cash flows.
Our future oil and natural gas production depends on our success in finding
or acquiring additional reserves that are economically recoverable. We may not
be successful in exploring for, developing or acquiring additional reserves. If
we fail to replace reserves, which decline as they are produced, our level of
production and cash flows will be adversely impacted. Our ability to make the
necessary capital investment to maintain or expand our asset base of oil and
natural gas reserves would be impaired to the extent cash flow from operations
is reduced and external sources of capital become limited or unavailable. If we
are not successful, our future production and revenues will be materially
adversely affected.
11
<PAGE>
The oil and natural gas business involves many operating risks that can cause
substantial losses.
Our operations are subject to risks inherent in the oil and natural gas
business, including:
. fires and explosions;
. surface cratering;
. uncontrollable flows of oil, underground natural gas and formation
water;
. natural disasters;
. pipe or cement failures or collapses;
. embedded or unremovable oil field drilling and service tools;
. abnormally pressured formations; and
. environmental hazards such as natural gas leaks, oil spills, pipeline
ruptures and discharges of toxic natural gases.
If any of these events occur, we could incur substantial losses as a result
of:
. injury or loss of life;
. severe damage to and destruction of property, natural resources and
equipment;
. fines and clean-up responsibilities for pollution and other
environmental damage; and
. suspension of our operations.
In addition, we do not carry business interruption insurance. For other
risks, we may not obtain insurance if we believe the cost of available
insurance is excessive relative to the risks presented. Pollution and
environmental risks generally are not fully insurable and we do not currently
carry insurance that would cover the full amount of our liability if one of
these risks were to occur. As a result, if a significant accident or other
event occurs and is not fully covered by insurance, such losses could have a
material adverse effect on our business, financial condition, results of
operations or cash flows.
We may not be able to successfully compete with competitors that are larger and
have greater resources.
We operate in a highly competitive environment and may not be successful
against our competitors. We compete with major and independent oil and natural
gas companies for the acquisition of desirable oil and natural gas properties,
as well as for the equipment and labor required to develop and operate such
properties. Many of these competitors have financial, technical and other
resources substantially greater than ours. The availability of a ready market
for our oil and natural gas production will depend in part on the following
factors, which are beyond our control:
. cost and availability of alternative fuels;
. level of consumer demand;
. extent of domestic production of oil and natural gas;
. extent of importation of foreign oil and natural gas;
. cost of and proximity to pipelines and other transportation facilities;
. regulations by state and federal authorities; and
. cost of complying with applicable environmental regulations.
12
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes assumptions, expectations, projections, intentions
and beliefs about future events. These statements are intended as "forward-
looking statements" under the Private Securities Litigation Reform Act of 1995.
We caution that assumptions, expectations, projections, intentions and beliefs
about future events may and often do vary from actual results and the
differences can be material.
All statements in this document that are not statement of historical fact
are forward looking statements. Forward looking statements include, but are not
limited to, such matters as:
. future production, operating or financial results;
. statements about pending or recent acquisitions, business strategy, and
expected capital spending or operating expenses;
. statements about drilling operations, including scheduled drilling dates
and objectives;
. beliefs or assumptions about the outlook for commodity prices;
. expectations regarding the availability of acquisition opportunities;
and
. anticipated developments with respect to pending litigation.
When used in this document the words "anticipate," "estimate," "project,"
"forecast," "plan," "potential," "will," "may," "should," and "expect" reflect
forward-looking statements.
There can be no assurance that actual results will not differ materially
from those expressed or implied in such forward looking statements. There are
many factors that could cause these forward-looking statements to be incorrect,
including the risks described under "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." Risks,
uncertainties and assumptions that could cause actual results to differ
materially from the expectations reflected in the forward-looking statements
include:
. drilling of wells;
. timing and amount of future production of oil and natural gas;
. operating costs and other expenses;
. cash flow and anticipated liquidity;
. the risks associated with exploration;
. our ability to find, acquire, market, develop and produce new
properties;
. oil and natural gas price volatility;
. the outcome of our dispute with Stone regarding our Lafitte field
interest;
. uncertainties in the estimation of proved reserves and in the projection
of future rates of production and timing of development expenditures;
. operating hazards attendant to the oil and natural gas business;
. downhole drilling and completion risks that are generally not
recoverable from third parties or insurance;
. potential mechanical failure or under-performance of significant wells;
. climatic conditions;
. availability and cost of material and equipment;
. delays in anticipated start-up dates;
13
<PAGE>
. actions or inactions of third-party operators of our properties;
. our ability to find and retain skilled personnel;
. availability of capital;
. the strength and financial resources of our competitors;
. regulatory developments;
. environmental risks; and
. general economic conditions.
When you consider these forward-looking statements, you should keep in mind
these risk factors and the other cautionary statements in this prospectus.
Although we believe our expectations reflected in these forward-looking
statements are based on reasonable assumptions, we cannot assure you that these
expectations will prove to have been correct.
14
<PAGE>
USE OF PROCEEDS
We expect our net proceeds from the sale of all of the common stock offered
in this offering to be approximately $13.7 million. We intend to use the
proceeds from this offering to repay a portion of our borrowings under our bank
credit facility. We intend to invest cash flow from operations and to reborrow
funds under our bank credit facility to accelerate our capital expenditures for
development and exploitation activities in south Louisiana, with a particular
focus on our Burrwood, West Delta and Lafitte fields.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the New York Stock Exchange under the symbol
GDP. At December 31, 2000, there were 13,318,920 shares of our common stock
outstanding. The following table sets forth the range of the high and low
closing sale prices by quarter as reported during 1998, 1999 and 2000.
<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
1998:
First Quarter.................................................... $8.00 $5.06
Second Quarter................................................... 7.19 5.25
Third Quarter.................................................... 5.63 2.25
Fourth Quarter................................................... 3.00 1.13
1999:
First Quarter.................................................... $1.50 $0.69
Second Quarter................................................... 1.88 0.94
Third Quarter.................................................... 2.69 0.94
Fourth Quarter................................................... 3.06 2.19
2000:
First Quarter.................................................... $6.25 $2.63
Second Quarter................................................... 5.56 4.25
Third Quarter.................................................... 6.25 4.50
Fourth Quarter................................................... 6.50 5.00
2001:
First Quarter (through January 5)................................ $5.44 $5.19
</TABLE>
The prices in the table above have been adjusted to give retroactive effect
to our one-for-eight reverse stock split in March 1998.
At December 31, 2000, the number of holders of record of our common stock
without determination of the number of individual participants in a security
position was 1,231.
15
<PAGE>
DIVIDEND POLICY
We have not paid a cash dividend on our common stock since our formation. We
do not anticipate paying any cash dividends on our common stock because we
intend to retain our cash flow to finance the expansion of our business and for
general corporate purposes. Additionally, our bank credit facility prohibits us
from paying cash dividends on our common stock. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources--Bank Credit Facility" for a discussion of our bank credit
facility.
In March 1999, we announced that we had suspended payment of our regular
quarterly cash dividend on both classes of our convertible preferred stock.
This measure was precipitated by a drop in commodity prices and was taken to
conserve cash for corporate and operating purposes. In September 2000, we
announced our reinstatement of the cash dividends on both our Series A and
Series B preferred stock and paid approximately $1.8 million of dividend
arrearages and approximately $296,000 of regular quarterly dividends on these
series of preferred stock. These payments, including the dividends declared and
paid in December, brought us current on our dividend payments on each of these
series. We will exchange all of the outstanding shares of our Series B
preferred stock for 1,189,510 shares of common stock concurrent with the
closing of this offering.
16
<PAGE>
CAPITALIZATION
The following table illustrates our actual and pro forma as adjusted cash
position and capitalization as of September 30, 2000. The pro forma as adjusted
presentation reflects this offering, our most recent private placement of
common stock and the exchange of our Series B preferred stock, as if they had
occurred on September 30, 2000. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and accompanying notes included in
this prospectus.
<TABLE>
<CAPTION>
September 30, 2000
---------------------
Pro Forma
Actual As Adjusted
-------- -----------
(in thousands)
<S> <C> <C>
Cash and cash equivalents................................ $ 2,030 $ 6,680
======== ========
Long-term debt, including current maturities:
Credit facility........................................ $ 23,865 $10,215
-------- --------
Total long-term debt, including current maturities... 23,865 10,215
Stockholders' equity:
Preferred stock, $1.00 par value per share, 10,000,000
shares:
Series A convertible preferred stock; issued and
outstanding 796,318 shares (liquidation preference of
$10.00 per share, aggregating to $7,963,180).......... 796 $ 796
Series B convertible preferred stock; issued and
outstanding 660,839 shares (liquidation preference
$10.00 per share, aggregating to $6,608,390).......... 661 --
Common stock, $0.20 par value per share, 25,000,000
shares authorized, 12,315,522 actual shares
outstanding, and 17,505,032 pro forma as adjusted
shares outstanding (1)................................ 2,463 3,501
Additional paid-in capital............................. 34,894 52,817
Accumulated deficit.................................... (11,117) (11,117)
-------- --------
Total stockholders' equity........................... 27,697 45,997
-------- --------
Total capitalization............................... $ 51,562 $ 56,212
======== ========
</TABLE>
--------
(1) The number of shares of common stock to be outstanding after this offering
includes the 3,000,000 shares being offered, 1,000,000 shares sold in a
private placement in October 2000, and 1,189,510 shares to be issued in
exchange for our Series B preferred stock simultaneously with the closing
of this offering but does not include:
. 3,387,978 shares issuable upon the exercise of outstanding warrants at a
weighted average price of $1.05 per share; and
. 791,813 shares that may be issued upon exercise of stock options
outstanding as of September 30, 2000, at a weighted average exercise
price of $4.35 per share.
17
<PAGE>
DILUTION
The net tangible book value of our common stock as of September 30, 2000 was
$24.3 million or approximately $1.68 per share. Net tangible book value per
share represents the amount of our stockholders' equity less intangible assets
and the liquidation preference of the Series A preferred stock, divided by
14,505,032 shares of outstanding common stock (which includes our most recent
private placement and the exchange of our Series B preferred stock which we
expect will occur concurrently with this offering).
Net tangible book value dilution per share to new investors represents the
difference between the amount per share paid by purchasers of common stock in
this offering and the pro forma net tangible book value per share of common
stock immediately after completion of this offering. Following:
. our sale of 3,000,000 shares of common stock in this offering at a
public offering price of $5.00 per share, and after deducting:
. the estimated offering expenses and commissions; and
. the application of the estimated net proceeds from this offering,
our pro forma net tangible book value as of September 30, 2000 would have been
$38.0 million, or $2.17 per share. This represents an immediate increase in net
tangible book value of $0.49 per share to existing stockholders and an
immediate dilution in net tangible book value of $2.83 per share to purchasers
of common stock in this offering. The following table illustrates the per share
dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share............................... $5.00
Net tangible book value per share as of September 30, 2000.... $1.68
Increase per share attributable to new investors.............. 0.49
-----
Net tangible book value per share after this offering................. 2.17
-----
Dilution per share to new investors................................... $2.83
=====
</TABLE>
The following table illustrates on a pro forma basis as of September 30,
2000 the difference between the number of shares of common stock purchased from
us, the total consideration paid to us and the average price paid by existing
stockholders and by the new investors purchasing shares of common stock in this
offering, before deduction of estimated offering expenses and commissions
payable by us:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 14,505,032 83% $24,314,100 62% $1.68
New stockholders........... 3,000,000 17 15,000,000 38 5.00
---------- --- ----------- ---
Total.................... 17,505,032 100% $39,314,100 100%
========== === =========== ===
</TABLE>
The foregoing table excludes:
. warrants to purchase 3,387,798 shares of common stock at a weighted
average exercise price of $1.05 per share; if all outstanding warrants
were exercised dilution to new investors would equal $3.01 per share;
and
. options to purchase 791,813 shares of common stock granted through
September 30, 2000 at a weighted average exercise price of $4.35 per
share; if all outstanding options were exercised, dilution to new
investors would equal $2.73 per share.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The consolidated financial data set forth below for the five years ended
December 31, 1995, 1996, 1997, 1998 and 1999 are derived from our financial
statements, which have been audited by KPMG LLP, and the financial statements
for the nine months ended September 30, 1999 and 2000 have been derived from
our unaudited financial statements. These unaudited financial statements have
been prepared on substantially the same bases as the audited financial
statements. You should read the following data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements included in this
prospectus. Information in this prospectus reflects our one-for-eight reverse
stock split that became effective in March 1998.
<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
--------------------------------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
-------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $ 6,174 $ 9,769 $12,901 $ 10,592 $14,020 $ 9,403 $20,038
Expenses:
Lease operating
expenses and
production taxes...... 1,030 1,615 2,316 2,822 3,591 2,008 5,001
Depreciation,
depletion and
amortization.......... 1,786 3,788 4,863 4,094 4,744 3,550 4,227
Exploration............ 193 1,149 3,206 6,010 1,656 1,295 2,084
Impairment of oil and
natural gas
properties............ 157 -- 550 1,076 465 -- --
Interest............... 1,132 828 1,416 1,910 2,811 1,678 3,696
General and
administrative........ 739 2,095 2,627 2,399 1,990 1,617 1,712
Preferred dividend
requirements of a
subsidiary(1)......... -- -- -- -- 73 -- 38
-------- ------- ------- -------- ------- ------- -------
Total costs and
expenses............ 5,037 9,475 14,978 18,311 15,330 10,148 16,758
-------- ------- ------- -------- ------- ------- -------
Gain (loss) on sale of
assets................ -- 88 688 4 (519) (519) 307
-------- ------- ------- -------- ------- ------- -------
Income (loss) before
income taxes........... 1,137 382 (1,389) (7,715) (1,829) (1,264) 3,587
Income tax provision
(2)................... -- -- -- -- -- -- (1,655)
Extraordinary item--
early extinguishment
of debt............... 483 -- -- -- -- -- --
-------- ------- ------- -------- ------- ------- -------
Net income (loss)....... $ 654 $ 382 $(1,389) $ (7,715) $(1,829) $(1,264) $ 5,242
Preferred stock
dividends.............. 255 645 1,205 1,256 1,249 942 887
-------- ------- ------- -------- ------- ------- -------
Net income (loss)
applicable to common
stock.................. $ 399 $ (263) $(2,594) $ (8,971) $(3,078) $(2,206) $ 4,355
======== ======= ======= ======== ======= ======= =======
Basic income (loss) per
common share(3)........ -- $ (0.05) $ (0.50) $ (1.71) $ (0.58) $ (0.42) $ 0.49
======== ======= ======= ======== ======= ======= =======
Diluted income (loss)
per common share(3).... -- $ (0.05) $ (0.50) $ (1.71) $ (0.58) $ (0.42) $ 0.35
======== ======= ======= ======== ======= ======= =======
Average common shares
outstanding--basic(3).. 3,465 5,226 5,229 5,243 5,288 5,262 8,873
======== ======= ======= ======== ======= ======= =======
Average common shares
outstanding--
diluted(3)............. 3,465 5,226 5,229 5,243 5,288 5,262 15,050
======== ======= ======= ======== ======= ======= =======
Other Data:
Adjusted EBITDA(4)...... $ 4,405 $ 6,058 $ 7,958 $ 5,371 $ 8,366 $ 5,778 $13,287
Net cash provided by
(used in) operating
activities............. 3,579 4,373 6,633 4,517 1,065 (1,075) 9,480
Net cash provided by
(used in) investing
activities............. 8,877 (4,163) (6,007) (14,959) (6,407) (5,341) (11,522)
Net cash provided by
(used in) financing
activities............. (12,553) (479) (177) 9,744 11,176 12,366 (1,856)
Capital
expenditures(5)........ 650 4,226 9,941 15,008 6,657 5,581 11,982
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
At December 31, At
--------------------------------------- September 30,
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 613 $ 345 $ 793 $ 96 $ 5,929 $2,030
Net property and
equipment (successful
efforts method)(6)..... 14,146 14,318 32,466 39,796 46,048 52,162
Total assets............ 22,383 22,399 37,538 44,037 56,259 63,259
Current portion of long-
term debt.............. -- -- -- 29,500 3,600 3,600
Long-term debt(7)....... 9,750 10,000 18,500 -- 33,353 20,265
Total stockholder's
equity................. 9,663 9,135 14,333 4,959 6,411 27,697
</TABLE>
--------
(1) In February 2000, all of the holders of the preferred units of our
subsidiary converted their preferred units into 1,533,333 shares of our
common stock.
(2) We recorded a net deferred tax asset of $1.6 million in the nine months
ended September 30, 2000 based on projections for generating sufficient
taxable income prior to the expiration of net operating loss carryforwards.
We did not reflect any provision for income taxes in the 1996 to 1999
periods due to the generation of net operating loss carryforwards or the
use of available net operating loss carryforwards to offset taxable income.
Valuation allowances were established for the net operating loss
carryforwards based on the evidence considered in the assessment of the
likelihood of utilizing the net operating loss carryforwards.
(3) We did not include a provision for income taxes in the consolidated
statements of operations for the period from January 1, 1995 through August
14, 1995 for the operations of La/Cal Energy Partners, one of our
predecessor companies, due to La/Cal being a partnership and income taxes
were the responsibility of the individual partners of La/Cal. Certain
unaudited pro forma information relating to the Company's results of
operations in 1995 had La/Cal been a corporation, follows:
<TABLE>
<CAPTION>
1995
------
<S> <C>
Pro forma information (unaudited):
Income before extraordinary item and income taxes................. $1,137
Pro forma income taxes............................................ 403
------
734
Extraordinary item--early extinguishment of debt.................. (483)
------
Pro forma net income.............................................. 251
Preferred stock dividends......................................... (255)
------
Pro forma earnings available to common stock...................... $ (4)
======
Pro forma income before extraordinary item per average common
share............................................................. $ 0.14
======
Pro forma extraordinary item per average common share.............. $(0.14)
======
Pro forma basic and diluted earnings (loss) per average common
share............................................................. --
Pro forma average common shares outstanding........................ 3,465
======
</TABLE>
(4) Adjusted EBITDA means earnings before interest, income taxes, depreciation,
depletion and amortization, impairment of oil and natural gas properties,
gains or losses on sales of assets, preferred dividend requirements of a
subsidiary and exploration expense. Adjusted EBITDA is not a calculation
based on generally accepted accounting principles. Adjusted EBITDA should
not be considered as an alternative to net income as an indicator of our
operating performance, or as an alternative to cash flow as a better
measure of liquidity. Our adjusted EBITDA calculation may not be comparable
to other similarly titled measures reported by other companies. We have
presented Adjusted EBITDA because of its wide acceptance as a financial
indicator and usefulness in assessing our funds available to finance our
activities.
(5) We include our acquisitions of oil and natural gas properties within this
classification.
(6) Net of depreciation, depletion and amortization associated with such
property and equipment.
(7) We restructured the debt under our bank credit facility during 1999 to
allow reclassification from current to long-term. This item also includes
$12,000,000 of convertible notes issued by two of our subsidiaries during
1999. These notes were converted into shares of our common stock in August
2000.
20
<PAGE>
PRO FORMA AS ADJUSTED FINANCIAL DATA
(in thousands, except per share data)
The following unaudited condensed pro forma as adjusted financial
information consists of our unaudited condensed pro forma as adjusted
consolidated statement of operations for the year ended December 31, 1999 and
the nine months ended September 30, 2000, and our unaudited condensed pro forma
as adjusted consolidated balance sheet as of September 30, 2000. You should
read the following data in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements included elsewhere in this prospectus. The pro forma
information gives effect to our most recent private placement of common stock
in October 2000 and the conversion of our subsidiaries' notes into shares of
our common stock in August 2000. The unaudited pro forma as adjusted
information additionally illustrates the impact of this offering and the
exchange of our Series B preferred stock, which is to occur simultaneously with
the offering, for shares of our common stock. These adjustments are reflected
as if these transactions were consummated as of January 1, 1999 for purposes of
the statement of operations data and as of September 30, 2000 for purposes of
the balance sheet data unless such transactions actually occurred prior to such
date. The pro forma results of operations are not necessarily indicative of the
results that would have occurred had the transactions been consummated as of
the beginning of the periods presented.
Unaudited Condensed Pro Forma As Adjusted Consolidated Statement of Operations
<TABLE>
<CAPTION>
Year Ended December 31, 1999
--------------------------------------------------------
Pro Forma Pro Pro Forma
Historical Adjustments Forma Adjustments As Adjusted
---------- ----------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues......... $14,020 $14,020 $14,020
Expenses:
Lease operating
expenses and
production
taxes.......... 3,591 3,591 3,591
Depreciation,
depletion and
amortization... 4,744 4,744 4,744
Exploration..... 1,656 1,656 1,656
Impairment of
oil and natural
gas
properties..... 465 465 465
Interest
expense........ 2,811 $(503)(2) 2,308 2,308
General and
administrative.. 1,990 1,990 1,990
Preferred
dividend
requirements of
a subsidiary... 73 73 73
------- ------- -------
Total costs and
expenses....... 15,330 14,827 14,827
------- ------- -------
Gain/(Loss) on
sale of
assets......... (519) (519) (519)
------- ------- -------
Income (loss)
before income
taxes........... (1,829) (1,326) (1,326)
Income tax
provision...... -- -- --
------- ------- -------
Net income
(loss).......... $(1,829) $(1,326) $(1,326)
------- ------- -------
Preferred stock
dividends (1999
amounts in
arrears)........ 1,249 1,249 612 (3) 637
------- ------- -------
Net income (loss)
applicable to
common stock.... $(3,078) $(2,575) $(1,963)
======= ======= =======
Basic income
(loss) per
common share.... $ (0.58) $ (0.14)
======= =======
Diluted income
(loss) per
common share.... $ (0.58) $ (0.14)
======= =======
Average common
shares
outstanding--
basic (1)....... 5,288 13,773
======= =======
Average common
shares
outstanding--
diluted (1)..... 5,288 13,773
======= =======
<CAPTION>
Nine Months Ended September 30, 2000
---------------------------------------------------------
Pro Forma Pro Pro Forma
Historical Adjustments Forma Adjustments As Adjusted
---------- ------------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues......... $20,038 $20,038 $20,038
Expenses:
Lease operating
expenses and
production
taxes.......... 5,001 5,001 5,001
Depreciation,
depletion and
amortization... 4,227 4,227 4,227
Exploration..... 2,084 2,084 2,084
Impairment of
oil and natural
gas
properties..... -- -- --
Interest
expense........ 3,696 $(1,631)(2) 2,065 2,065
General and
administrative.. 1,712 1,712 1,712
Preferred
dividend
requirements of
a subsidiary... 38 38 38
---------- -------- -----------
Total costs and
expenses....... 16,758 15,127 15,127
---------- -------- -----------
Gain/(Loss) on
sale of
assets......... 307 307 307
---------- -------- -----------
Income (loss)
before income
taxes........... 3,587 5,218 5,218
Income tax
provision...... (1,655) (1,655) (1,655)
---------- -------- -----------
Net income
(loss).......... $ 5,242 $ 6,873 $ 6,873
---------- -------- -----------
Preferred stock
dividends (1999
amounts in
arrears)........ 887 887 409(3) 478
---------- -------- -----------
Net income (loss)
applicable to
common stock.... $ 4,355 $ 5,986 $ 6,395
========== ======== ===========
Basic income
(loss) per
common share.... $ 0.49 $ 0.38
========== ===========
Diluted income
(loss) per
common share.... $ 0.35 $ 0.32
========== ===========
Average common
shares
outstanding--
basic (1)....... 8,873 16,829
========== ===========
Average common
shares
outstanding--
diluted (1)..... 15,050 20,240
========== ===========
</TABLE>
21
<PAGE>
Unaudited Condensed Pro Forma As Adjusted Consolidated Balance Sheet
<TABLE>
<CAPTION>
As of September 30, 2000
------------------------------------------------------------
Pro Forma
Pro Forma Pro As Adjusted Pro Forma
Historical Adjustments Forma Adjustments As Adjusted
---------- ----------- -------- ----------- -----------
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash
equivalents.............. $ 2,030 $4,650 (4) $ 6,680 $13,650 (5) $ 20,330
Accounts receivable
Trade and other......... 1,108 1,108 1,108
Accrued oil and gas
revenue................ 4,797 4,797 4,797
Prepaid insurance and
other.................... 148 148 148
-------- -------- --------
Total current assets........ 8,083 12,733 36,279
Net property and equipment.. 52,162 52,162 52,162
Restricted cash............. 1,030 1,030 1,030
Deferred taxes benefit...... 1,655 1,655 1,655
Other investments and
deferred charges........... 329 329 329
-------- -------- --------
Total assets............ $ 63,259 $ 67,909 $ 81,559
======== ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS
EQUITY
<S> <C> <C> <C> <C> <C>
Current liabilities
Current portion of long-
term debt................ $ 3,600 $ 3,600 $ 3,600
Accounts payable.......... 5,064 5,064 5,064
Accrued liabilities....... 1,242 1,242 1,242
Current portion other
noncurrent liabilities... 1,240 1,240 1,240
-------- -------- --------
Total current
liabilities............ 11,146 11,146 11,146
Long-term debt.............. 20,265 20,265 20,265
Other non-current
liabilities................ 4,151 4,151 4,151
Stockholders' equity:
Preferred stock Series A.. 796 796 796
Preferred stock Series B.. 661 661 (661)(3) --
Common stock.............. 2,463 200 (4) 2,663 600 (5) 3,501
238 (3)
Additional paid-in
capital.................. 34,894 4,450 (4) 39,344 13,050 (5) 52,817
423 (3)
Accumulated deficit....... (11,117) (11,117) (11,117)
-------- -------- --------
Total stockholders'
equity................... 27,697 32,347 45,997
-------- -------- --------
Total liabilities and
stockholders' equity... $ 63,259 $ 67,909 $ 81,559
======== ======== ========
</TABLE>
--------
(1) We computed pro forma basic net income (loss) per common share by dividing
pro forma income applicable to common stock by the pro forma weighted
average shares of common stock outstanding of 13,773,168 for the year ended
December 31, 1999 and 16,829,088 for the nine months ended September 30,
2000. We did not include outstanding warrants and options considered common
stock equivalents in the 1999 calculation because their effect would be
antidilutive. The following table reconciles the weighted-average shares
outstanding used for the computations used in the 1999 and 2000 periods:
<TABLE>
<CAPTION>
Nine months
Year ended ended
December 31, September 30,
1999 2000
------------ -------------
<S> <C> <C>
Historical basic method........................... 5,288,011 8,873,159
Private placement of 1,000,000 shares............. 1,000,000 1,000,000
Exchange of Series B preferred stock.............. 1,189,510 1,189,510
Conversion of our subsidiaries' notes............. 3,295,647 2,766,419
Offering.......................................... 3,000,000 3,000,000
---------- ----------
Pro forma basic method............................ 13,773,168 16,829,088
Dilutive stock warrants........................... -- 2,757,535
Dilutive stock options............................ -- 653,787
---------- ----------
Diluted method.................................... 13,773,168 20,240,410
========== ==========
</TABLE>
22
<PAGE>
(2) Our subsidiaries' notes were converted into 3,295,647 shares of common
stock in August 2000, which includes 60,000 shares issued as an
underwriting fee. The interest adjustment on the statement of operations
represents the elimination of amortization of deferred financing costs of
$109,088 and $300,292, interest expense of $251,154 and $973,631, based on
the aggregate principal amounts of the notes of $12.0 million at an annual
interest rate of 8.0%, and amortization of discount on the notes of
$142,500 and $357,016, for the 1999 and 2000 periods respectively.
(3) The balance sheet adjustment represents the conversion of the Series B
preferred stock into 1,189,510 shares of common stock based on a conversion
factor of 1.8 shares of common stock for each share of Series B preferred
stock. The adjustment to the statement of operations represents the
elimination of dividends associated with the Series B preferred stock. The
conversion premium in excess of the terms per the original preferred stock
issuance is valued at $2,263,374. We have not made an adjustment in the pro
forma statement of operations for this one-time charge; however, we will
reflect it as preferred stock dividends at the date of conversion to arrive
at net income applicable to common stock.
(4) This adjustment reflects our most recent private placement of 1,000,000
shares of common stock at $5.00 per share, including payment of
underwriters' fee totaling $350,000.
(5) This adjustment represents proceeds of this offering, based on a price of
$5.00 per share on 3,000,000 shares, and after payment of estimated
offering expenses and commissions totaling $1,350,000.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
We are an independent oil and natural gas company engaged in the
exploration, exploitation, development and production of oil and natural gas
properties in the transition zone of south Louisiana and in north Louisiana,
the Gulf Coast of Texas and East Texas.
We were created by the combination of Patrick Petroleum Company ("Patrick")
and La/Cal Energy Partners, a partnership in which we had a controlling
interest ("La/Cal"), in August 1995. The combination was a reverse merger in
which our current management gained control of the combined company, renamed it
Goodrich Petroleum Corporation and assumed Patrick's New York Stock Exchange
listing.
We use the successful efforts method of accounting for exploration and
development expenses. Costs of exploratory drilling are initially capitalized,
but if proved reserves are not found, the costs are subsequently expensed. All
other exploratory costs are charged to expense as incurred. Development and
leasehold costs are capitalized, including the costs of unsuccessful
development wells. When proved reserves are found on an undeveloped property,
leasehold cost is reclassified from undeveloped leases to proved oil and
natural gas properties. Significant undeveloped leases are reviewed
periodically and a valuation allowance is provided for any estimated decline in
value. Cost of all other undeveloped leases is amortized over the estimated
average holding period of the leases.
We have adopted Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets to be Disposed Of, in which
an impairment is determined to have occurred and a loss is recognized when the
difference between future cash inflows expected to be generated by an
identifiable long-lived asset and cash outflows expected to be required to
obtain those cash inflows is less than the carrying value of the asset.
Depletion and depreciation of producing oil and natural gas properties is
calculated using the unit-of-production method. Proved developed reserves are
used to compute unit rates for unamortized tangible and intangible development
costs, and proved reserves are used for unamortized leasehold costs. Estimated
dismantlement, abandonment and site restoration costs, net of salvage value,
are considered in determining depreciation and depletion provisions.
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 were $20,038,000
compared with $9,403,000 for the nine months ended September 30, 1999 due to an
increase in commodity prices and higher oil and natural gas production. Oil and
natural gas sales were reduced by $1,763,000 in the nine months ended September
30, 2000 as a result of hedging activity.
The following table reflects the production volumes and pricing information
for the periods presented:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1999 September 30, 2000
------------------------ ------------------------
Production Average Price Production Average Price
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Natural gas (Mcf).......... 2,239,634 $ 2.25 2,453,378 $ 3.57
Oil (Bbls)................. 287,159 $14.47 435,607 $25.02
</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, due primarily to higher oil and natural gas sales and
additional costs associated with the Lafitte, Burrwood and West Delta fields.
Production taxes are calculated as a percentage of revenue from oil and gas
sales. Higher commodity prices and sales resulted in an
24
<PAGE>
increase in our production taxes of approximately $1.0 million from period to
period. Our increase in lease operating expense also reflects expenses from our
Lafitte property of $653,000 in the first nine months of this year and expenses
from our Burrwood/West Delta property of $725,000 in the first nine months of
this year. The prior period does not include any expense relating to these
properties.
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, due to increased capitalized costs and higher production volumes.
Exploration expense for the nine months ended September 30, 2000 was
$2,084,000 versus $1,295,000 for the same period of 1999, due primarily to
seismic costs of $796,000 in the current period compared to $51,000 in the
prior period. 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 $3,696,000 in the nine months ended September 30, 2000
compared to $1,678,000 in the nine months ended September 30, 1999 due to
higher average debt outstanding. The 2000 amount includes $845,000 of non cash
expenses associated with the amortization of financing costs and 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 compared to $1,617,000 in the nine months ended
September 30, 1999.
We recorded a gain on the sale of certain non-core oil and natural gas
properties of $307,000 for the nine months ended September 30, 2000. We
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, we paid an aggregate of approximately $1.8 million of
dividend arrearages and $296,000 of regular quarterly dividends on our
outstanding series of preferred stock. These payments brought us current as to
dividends on both series of preferred stock.
Year ended December 31, 1999 versus year ended December 31, 1998
Total revenues in 1999 amounted to $14,021,000 and were $3,429,000 higher
than total revenues in 1998, due primarily to higher oil and natural gas
revenues. Oil and natural gas sales were $3,898,000 higher due to higher oil
and natural gas prices, higher oil and natural gas production volumes and
additional oil volumes associated with the Lafitte field acquisition in
September 1999.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1999
------------------------ ------------------------
Production Average Price Production Average Price
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Natural gas (Mcf).......... 2,782,825 $ 2.18 2,930,655 $ 2.41
Oil (Bbls)................. 316,768 $11.88 394,442 $16.88
</TABLE>
Lease operating expense and production taxes were $3,592,000 for 1999
compared to $2,822,000 for 1998, or $770,000 higher substantially due to costs
related to the Lafitte field properties. Depletion, depreciation and
amortization was $4,744,000 in 1999 versus $4,094,000 in 1998, or $650,000
higher due to increased oil and natural gas production, including volumes
associated with the Lafitte field properties.
We incurred $1,656,000 of exploration expense in 1999 compared to $6,010,000
in 1998. Included in the 1999 exploration expense is $120,000 of costs related
to dry holes during the period versus $3,684,000 of such costs related to dry
holes in 1998.
We recorded an impairment in the recorded value of certain oil and natural
gas properties in 1999 in the amount of $465,000 due to the complete depletion
of the reserves on three one-well non-core fields. This
25
<PAGE>
compares to an impairment of $1,076,000 recorded in 1998 as the result of two
non-core fields depleting earlier than originally anticipated.
Interest expense was $2,811,000 in 1999 compared to $1,910,000 (47% higher)
in 1998 due to our having higher average debt outstanding as a result of the
September 23, 1999 private placement and a higher effective interest rate in
1999 compared to 1998. The 1999 effective interest rate includes amortization
of financing costs and non-cash expense due to the amortization of the discount
on the 1999 private placement.
General and administrative expenses amounted to $1,990,000 for 1999 versus
$2,399,000 in 1998.
During 1999, no preferred stock dividends were declared; however, dividends
on both of our series of preferred stock did accumulate to an amount equal to
$1,249,000 for 1999. We also accrued non-cash dividends on preferred units
issued by a subsidiary of $73,000, which is reflected as preferred dividends of
subsidiary in the statement of operations for 1999.
Year ended December 31, 1998 versus year ended December 31, 1997
Total revenues in 1998 amounted to $10,592,000 and were $2,309,000 lower
than total revenues in 1997 due to lower oil and natural gas revenues and the
loss of revenues from a pipeline joint venture. Oil and natural gas sales were
$1,515,000 lower due primarily to lower oil and natural gas prices, partially
offset by higher production volumes. We had no revenues from the pipeline joint
venture in 1998 compared to $1,078,000 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:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1998
------------------------ ------------------------
Production Average Price Production Average Price
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Natural gas (Mcf).......... 2,449,320 $ 2.55 2,782,825 $ 2.18
Oil (Bbls)................. 282,380 $18.06 316,768 $11.88
</TABLE>
Lease operating expense and production taxes were $2,822,000 for 1998
compared to $2,316,000 for 1997, or $506,000 higher, due primarily to Goodrich
not incurring, in the 1997 period, ad valorem taxes related to the La/Cal II
properties that were the responsibility of the La/Cal II partners.
Additionally, the 1998 period includes eight additional producing wells and
twelve months of lease operating expense and production taxes for the La/Cal II
properties, compared to eleven months for 1997, due to the effective date of
the acquisition being January 31, 1997. Depletion, depreciation and
amortization was $4,094,000 in 1998 versus $4,863,000 in 1997, or $769,000
lower, substantially due to no amortization of the pipeline joint venture in
1998 compared to $741,000 in 1997.
We incurred $6,010,000 of exploration expense in 1998 compared to $3,206,000
in 1997. Included in the 1998 exploration expense is $3,684,000 of costs
related to dry holes during the period versus $2,342,000 of such costs in 1997.
We recorded an impairment in the recorded value of certain oil and natural
gas properties in 1998 in the amount of $1,076,000 due to lower oil prices and
higher than expected depletion rates. This compares to an impairment of
$550,000 recorded in 1997.
Interest expense was $1,910,000 in 1998 compared to $1,417,000 (35% higher)
in 1997 due to our having higher average debt outstanding, slightly offset by a
lower effective interest rate in 1998 compared to 1997.
General and administrative expenses amounted to $2,399,000 for 1998 versus
$2,628,000 in 1997.
Our preferred stock dividends amounted to $1,256,000 for 1998 compared to
$1,205,000 in 1997, or $51,000 higher, due to twelve months of dividends being
paid on our Series B Preferred Stock in the current year versus eleven months
in the prior year.
26
<PAGE>
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.
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
$1,862,000, 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, 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 was reduced
for paydowns on the Company's credit line of $3,226,000, production payments of
$453,000, debt issuance costs of $30,000 and changes in restricted cash of
$1,030,000. 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 1999 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.
Our current liabilities exceeded our current assets at September 30, 2000 by
$3,063,000, which includes the current portion of long-term debt under our
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 2000 private placement of
common stock, the Company expects to be able to meet its current obligations as
they become due.
Net cash provided by operating activities was $1,065,000 for the year ended
December 31, 1999 compared to $4,517,000 for the same period in 1998 and
$6,633,000 for the same period in 1997. Our net cash flow provided by operating
activities decreased in 1999 due to the use of part of the proceeds from our
private placement of securities in 1999 to pay down accounts payable by
$5,052,000.
Net cash used in investing activities amounted to $6,407,000 in 1999
compared to $14,959,000 in 1998 and $6,007,000 in 1997. The amount for the year
ended December 31, 1999 is principally composed of cash paid in connection with
the purchase of our Lafitte property for $4,100,000 and exploration and
drilling capital expenditures of $2,557,000 primarily in the Lafitte and Second
Bayou fields. Net cash used in investing activities for the year ended December
31, 1998 is principally composed of cash paid for exploration and drilling
capital expenditures of $14,879,000. Net cash used in investing activities for
the year ended December 31, 1997 reflects non-acquisition capital expenditures
of $7,866,000 and cash paid in connection with the purchase of oil and natural
gas properties of $2,075,000. These amounts were offset by proceeds from the
sale of our interest in the pipeline joint venture $3,564,000 and the sale of
certain oil and natural gas properties located in Montana.
Net cash provided by financing activities was $11,176,000 in 1999 and
$9,744,000 in 1998, compared to net cash used in financing activities of
$177,000 in 1997. 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
$1,303,000 and paydowns of $2,409,000 of our bank credit facility. The 1999
period reflects no preferred dividends. The 1998 amount includes the borrowing
of $11,500,000 by us under our line of credit offset by paydowns during the
year of $500,000. Preferred stock dividends in 1998 amounted to $1,256,000. The
1997 amount includes the borrowing of $9,000,000 by us under our line of
credit, which was used to pay off the debt assumed in our acquisition of La/Cal
II, L.P. Acquisition and to pay the cash portion of the purchase price. The
1997 amount also includes other borrowings
27
<PAGE>
of $3,000,000 against our line of credit, offset by paydowns during the year of
$3,500,000 and the payoff of La/Cal II debt of $7,464,000. Preferred stock
dividends in 1997 amounted to $1,205,000.
Bank Credit Facility
Our credit facility with Compass Bank currently provides for a borrowing
base of $27,100,000, subject to monthly reductions of $300,000. On September
30, 2000, the amount outstanding under our credit facility was $23,865,000.
Subsequent payments have reduced the outstanding balance to $22,965,000.
Substantially all of our assets are pledged to secure our existing credit
facility. We expect to repay a portion of the amount outstanding under our
credit facility with the proceeds of this offering. The maturity date under our
credit facility is November 1, 2001. Interest on our credit facility is at the
Compass Bank Index Rate plus 5/8%, or approximately 10.25% at September 30,
2000.
Prior to the closing of this offering, we will amend our credit facility
with Compass Bank to increase its size to $50.0 million of aggregate borrowing
capacity with an initial borrowing base of $30.0 million. The borrowing base
will be subject to semi-annual redetermination based upon a review of our
reserves. Interest under our credit facility will accrue at a rate calculated
at our option as either the Compass Bank prime rate, or LIBOR plus an
applicable margin that increases as the amount outstanding under the facility
increases.
Substantially all of our assets will be pledged to secure our amended credit
facility. The credit facility will mature on April 1, 2003. Prior to maturity,
no payments of principal are required so long as the borrowing base exceeds the
credit facility balance. Interest is payable monthly. Our credit facility
restricts us from declaring or paying dividends on our common stock without our
lender's consent.
Recent Financing Transactions
On September 28, 2000, we received irrevocable commitments to purchase
1,000,000 shares of our common stock. In October 2000, we completed the sale of
these shares for gross proceeds of $5.0 million.
In September 2000, we paid an aggregate of approximately $1.8 million of
dividend arrearages and $296,000 of regular quarterly dividends on our Series A
and Series B preferred stock. These payments, including the dividends declared
and paid in December, brought us current on our dividend payments on both of
our series of preferred stock.
We have reached agreement with all of the holders of our Series B preferred
stock to exchange each share of Series B preferred stock for 1.8 shares of our
common stock. The exchange offer is contingent upon and will close concurrently
with this offering. We will issue 1,189,510 shares of our common stock as a
result of the exchange.
In August 2000, we issued 3,295,647 shares of our common stock in connection
with the conversion of convertible notes issued by two of our subsidiaries. The
convertible notes had outstanding principal and accrued interest of $12.9
million at the time of conversion.
In February 2000, we completed a private placement of 1,533,333 shares of
our common stock resulting in gross proceeds of $4.5 million.
Commitments and Contingencies
In connection with the Burrwood and West Delta acquisitions, we 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, we have 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 $3.5 million. The cost
of the seismic study is expected to be approximately $2.4 million and we have
already paid $1.2 million of this amount.
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<PAGE>
The U.S. Environmental Protection Agency has identified us as a potentially
responsible party for the cost of clean-up of "hazardous substances" at an oil
field waste disposal site in Vermilion Parish, Louisiana. We have estimated
that the remaining cost of long-term clean-up of the site will be approximately
$3.5 million, with our percentage of responsibility estimated by the EPA to be
approximately 3.05%. As of September 30, 2000, we have paid approximately
$321,000 in costs related to this matter, and $122,500 has been accrued for the
remaining liability. These costs have not been discounted to their present
value. The EPA and the potentially responsible parties 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 our percentage of
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 potentially responsible parties. Therefore,
the ultimate cost of the clean up to us could be significantly higher than the
amount presently estimated or accrued for this liability.
Accounting Changes
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, we must
recognize the fair value of all derivative instruments as either assets or
liabilities in our 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, we make use of derivative
instruments to hedge specific market risks. We have not yet determined the
effects that SFAS No. 133 will have on our 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
We are exposed to interest rate risk on our long-term debt with variable
interest rates. As of September 30, 2000 the interest rate on our long-term
debt was 10.25%. Based on the overall interest rate exposure on our variable
rate debt of $23.9 million at September 30, 2000, a hypothetical 2% increase in
the interest rates would increase our interest expense by approximately
$477,000 per year.
Hedging Activity
We enter into futures contracts or other hedging arrangements from time to
time to manage the commodity price risk for a portion of our production. We
consider these to be hedging activities and, as such, monthly settlements on
these contracts are reflected in our oil and natural gas sales. Our strategy,
which is reviewed periodically by our board of directors, has been to hedge
between 30% and 70% of our production. Most of our hedging arrangements are in
the form of costless collars whereby a floor and a ceiling are fixed. It is our
belief that the benefits of the downside protection afforded by these costless
collars outweigh the costs we incur by losing potential upside when commodity
prices increase. We have not adopted a formal policy with respect to hedging
arrangements but intend to do so in accordance with accounting pronouncements.
We do not expect our hedging policy or future hedging practice to differ
materially from our historical practice--to hedge a portion of our production
ranging from 30% to 70% in order to reduce the impact of short-term
fluctuations in prices. We will not engage in speculative activity not
supported by production.
Our futures contract agreements provide for separate contracts tied to the
New York Mercantile Exchange ("NYMEX") light sweet crude oil and natural gas
futures contracts. We have contracts which contain specific price ranges or
"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, we pay the difference, and to the extent the
contract price exceeds the average NYMEX price, we receive the difference.
29
<PAGE>
As of September 30, 2000, our crude oil hedging contracts were as follows:
. 350 Bbls of oil per day with a no cost collar of $19.00 and $21.00 per
barrel through December 2000;
. 150 Bbls of oil per day with a no cost collar of $18.20 and $20.20 per
barrel through December 2000;
. 500 Bbls of oil per day with a no cost collar of $25.00 to $32.40 per
day from October 2000 through December 2000;
. 500 Bbls of oil per day with a no cost collar of $20.00 and $28.40 per
barrel from January 2001 through December 2001; and
. 300 Bbls of oil per day with a no cost collar of $23.00 and $29.55 per
barrel from January 2001 through December 2001.
The fair value of the crude oil hedging contracts in place at September 30,
2000 would result, if not accounted for as hedges, in a liability of $496,000.
At September 30, 2000, our natural gas hedging contracts were as follows:
. 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;
. 6,500 MMBtu per day with a no cost collar of $3.70 and $4.53 per MMBtu
from October 2000 through December 2000; and
. 5,000 MMBtu per day with a no cost collar of $3.05 and $4.45 per MMBtu
from January 2001 through December 2001.
The fair value of the natural gas hedging contracts in place at September
30, 2000 would result, if not accounted for as hedges, in a liability of
$970,000.
We have the option to terminate our outstanding oil and natural gas hedging
contracts by paying the amount of the liability. We do not anticipate
terminating any of our open contracts.
For the fourth quarter of 1999, we had 305,000 Mcf (44%) of our gas hedged.
We received $2.41 per Mcf of gas during this period versus an average NYMEX gas
price of $2.40. For the first quarter of 2000 we had 72,800 barrels (66%) of
our oil hedged and 455,000 Mcf (64%) of our gas hedged. We received $24.18 per
barrel of oil and $2.58 per Mcf during this period versus an average NYMEX
price of $30.21 per barrel of oil and $2.57 per Mcf. For the second quarter of
2000, we had 85,000 barrels (56%) of our oil hedged and 455,000 Mcf (59%) of
our gas hedged. We received $24.12 per barrel of oil and $3.74 per Mcf during
this period versus an average NYMEX price of $28.64 per barrel of oil and $3.88
per Mcf. For the third quarter of 2000, we had 92,000 barrels (53%) of our oil
hedged and 460,000 Mcf (48%) of our gas hedged. We received $26.33 per barrel
of oil and $4.17 per Mcf during this period versus an average NYMEX price of
$31.46 per barrel of oil and $4.29 per Mcf.
In December 2000, we entered into three swap agreements with a third party
covering 5,000 Mcf per day of our natural gas production in January, February
and March 2001. The January swap agreement is at a price of $7.75 per Mcf, the
February swap agreement is at a price of $7.42 per Mcf and the March swap
agreement is at a price of $7.60 per Mcf. At the end of the month covered by
each swap agreement, we will receive the difference between the price indicated
above for that agreement and an agreed upon third-party index price if the
index price is lower. If the index price is higher, we will pay the difference.
Price Fluctuations and the Volatile Nature of Markets
Despite the measures we have taken to attempt to control price risk, we
remain subject to price fluctuations for oil and natural gas sold in the spot
market. Prices received for natural gas sold in the spot market are volatile
due primarily to seasonality of demand and other factors beyond our control.
Oil and natural
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<PAGE>
gas prices can change dramatically primarily as a result of the balance between
supply and demand. The trend since 1998 has been upward, with our average
natural gas price received for the quarter ending September 30, 2000 of $4.17
per Mcf, up from $2.41 per Mcf in 1999 and $2.18 per Mcf in 1998. Our average
oil price received for the quarter ended September 30, 2000 was $26.33, up from
our average price received of $16.88 in 1999 and $11.88 in 1998. There can be
no assurance that prices will not decline from current levels. Declines in
domestic oil and natural gas prices could have a material adverse effect on our
financial position, results of operations and quantities of reserves
recoverable on an economic basis.
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<PAGE>
BUSINESS AND PROPERTIES
We are an independent oil and natural gas company engaged in the
exploration, exploitation, development and production of oil and natural gas
properties in the transition zone of south Louisiana and in north Louisiana,
the Gulf Coast of Texas and East Texas. We have been active in these regions
since 1975 and have established extensive technical and operating experience in
these areas.
As of June 30, 2000, we had estimated proved reserves of approximately 30.7
Bcf of natural gas and 6.7 MMBbls of oil, or an aggregate of 71.0 Bcfe. Our
proved reserves had a pre-tax PV-10 Value of $153.7 million and an after-tax
Standardized Measure value of $116.2 million at June 30, 2000, based on pricing
of $29.80 per Bbl of oil and $4.56 per Mcf of natural gas.
We have an inventory of over 100 development, exploitation and exploration
projects that we believe provides us with an opportunity to substantially
increase our production and reserves. Our Burrwood, West Delta and Lafitte
fields account for approximately 80% of our 2001 capital budget of $20.0
million. Our 2001 budget includes plans to drill approximately 18 new wells and
conduct 15 workovers and recompletions on existing wells. Our capital
expenditures for the first nine months of 2000 totaled $12.0 million, of which
$1.2 million represents the net purchase price for our interests in the
Burrwood and West Delta fields. Our production has already increased 67% to 2.0
Bcfe in the third quarter of 2000 from 1.2 Bcfe in the third quarter of 1999.
There can be no assurance that we will be able to achieve additional production
increases.
Goodrich resulted from a business combination on August 15, 1995 between
La/Cal Energy Partners and Patrick Petroleum Company. La/Cal was a privately
held independent oil and gas partnership formed in July 1993 and engaged in the
development, production and acquisition of oil and natural gas properties,
primarily in south Louisiana. Patrick was a NYSE listed independent oil and gas
company engaged in the exploration, production, development and acquisition of
oil and natural gas properties in the continental United States.
In January 1997, we acquired the oil and gas properties of La/Cal Energy
Partners II and certain working interest owners for a purchase price of $16.5
million. The purchase price was comprised of $1.5 million in cash, the
assumption of $7.5 million of long-term debt and the issuance of 750,000 shares
of our Series B preferred stock with an aggregate liquidation value of $7.5
million.
Our principal offices are located at 815 Walker, Suite 1040, Houston, Texas
77002. We currently have approximately 4,400 square feet leased through
January, 2003 at an annual rate of $16.50 per square foot for 2000 escalating
to $17.50 for 2001 and $18.50 for 2002. We also have offices in Shreveport,
Louisiana. We have 16 employees. Our website is www.goodrichpetroleum.com. The
information on our website is not part of this prospectus.
Our Strategy
Our principal strategy is to increase production, cash flow and reserves
through the acquisition and subsequent exploitation and development of mature
properties, complimented by select exploration activities, in our core areas.
We focus on fields that have multiple productive reservoirs with an established
production history and infrastructure in place. Due to depletion, these fields
tend to no longer be the focus of the seller's technical staff. By conducting
our own exhaustive field studies prior to making an offer to acquire any such
properties, we strive to achieve a superior technical understanding of the
target property. Upon completion of an acquisition, we are generally prepared
to implement operations designed to increase production, cash flow and reserves
by drilling new wells and conducting workovers and recompletions of existing
wells. Other elements of our near-term strategy include:
Aggressively develop our Burrwood, West Delta and Lafitte fields. We plan to
pursue 92 development and exploitation projects in our Burrwood, West Delta and
Lafitte fields, 80% of which are scheduled for the next
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<PAGE>
two years. This development and exploitation activity is already underway and
will be accelerated with the liquidity we gain from this offering. In addition,
we expect to complete a 41 square mile 3-D seismic survey over our Burrwood and
West Delta fields by June 2001. We believe that this data will both further
define our proved and developmental projects and allow us to pursue additional
projects and deep prospects that we have not yet identified. The following
table contains information with respect to certain near-term projects we have
identified:
<TABLE>
<CAPTION>
Capital Actual/Estimated
Burrwood, West Delta and Number Reserve Expenditures First Production
Lafitte Fields of Projects Classification (in millions)(1)(2) Date(2)
------------------------ ----------- ------------------ ------------------- ----------------
<S> <C> <C> <C> <C>
Proved and
Developmental......... 28 Proved Developed $ 4.7 July 2000
Non-Producing
14 Proved Undeveloped 7.9 September 2000
12 Developmental 11.3 August 2000
--- -----
Subtotal.............. 54 23.9
--- -----
Probable/Possible...... 25 Probable 16.6 November 2000
13 Possible 4.5 March 2001
--- -----
Subtotal.............. 38 21.1
--- -----
Total............... 92 $45.0
=== =====
</TABLE>
--------
(1) Capital expenditures have been increased from those used in the June 30,
2000 reserve report to reflect current estimated costs.
(2) The dates and associated capital expenditures are based upon our present
capital budget. Capital expenditures and commencement of any production
from these projects will occur over an extended period commencing with the
dates shown. Actual numbers of projects, amounts of capital expenditures
and commencement of production will be dependent upon economic conditions
affecting oil and gas prices and production costs as well as the results
of drilling and development.
Maintain our focus on south Louisiana. We will continue to concentrate our
activities in our core areas, primarily the transition zone of south Louisiana.
We have assembled a large inventory of technical data and expertise over the
last 25 years, resulting in an approximate 70% drilling success rate and the
achievement of production in over 70 fields in Louisiana. Over 78% of our
proved reserves are in south Louisiana and more than 95% of our 2001 capital
budget is dedicated to development and exploitation activities in the region.
South Louisiana is highly attractive to us due to the availability of mature
oil and natural gas properties with an established operating infrastructure,
resulting in multiple opportunities for significant reserve and production
gains through acquisitions and additional development and exploitation
activities. We believe that our region-specific geological, engineering and
production experience provides us with a competitive advantage to identify and
complete additional acquisitions, development projects and exploitation
projects in south Louisiana.
Maintain significant operatorship. We currently operate 65% of our
properties, providing us with control over the planning, incurrence and timing
of many capital and operating expenditures. As operator of the Burrwood and
West Delta fields, we intend to use the liquidity that we gain from this
offering to accelerate the development and exploitation projects within these
fields.
Repeat our recent acquisition success. We recently acquired our interests in
the Burrwood, West Delta and Lafitte fields for an aggregate purchase price of
$10.1 million. Based on independent reserve engineering estimates and factoring
in the estimated capital expenditures to develop these reserves, we expect an
all-in finding cost of $0.71 per Mcfe for these properties. Since closing these
acquisitions, we have increased field production of oil and natural gas at
Lafitte by 100% to approximately 9,000 gross Mcfe per day and at Burrwood and
West Delta by 144% to 11,000 gross Mcfe per day. These production increases,
when coupled with additional production increases achieved in other fields,
have allowed us to increase net daily production levels from approximately
12,800 Mcfe per day one year ago to approximately 22,000 Mcfe per day
currently.
We believe there will continue to be attractive opportunities to acquire
properties in our core areas as major and large independent oil and natural gas
companies continue to focus their resources away from mature
33
<PAGE>
properties in south Louisiana to the development of projects in the deep water
Gulf of Mexico and in foreign countries. The acquisition opportunities that we
pursue generally have the following characteristics:
. located in our core areas, particularly in south Louisiana;
. significant cumulative production histories and low current production
levels;
. multiple productive reservoirs with complex geology and significant 3-D
seismic applicability;
. numerous identified development projects; and,
. significant controlling interests and operatorship.
Oil and Natural Gas Operations and Properties
The following table provides proved reserve information and pre-tax PV-10
Values for our oil and natural gas properties as of June 30, 2000:
<TABLE>
<CAPTION>
Net Proved % of Total
Reserves PV-10 Value PV-10
Field (MMcfe) (in thousands) Value
----- ---------- -------------- ----------
<S> <C> <C> <C>
Louisiana:
Lafitte............................... 18,554 $ 40,732 26.5%
Burrwood and West Delta............... 20,671 37,989 24.7
Second Bayou.......................... 5,552 15,043 9.8
Pecan Lake............................ 4,499 12,312 8.0
Isle St. Jean Charles................. 2,821 8,337 5.4
Other................................. 7,631 17,745 11.7
------ -------- ----
Total Louisiana..................... 59,728 132,158 86.0
------ -------- ----
Texas:
Mary Blevins.......................... 2,899 4,944 3.2
Sean Andrew........................... 1,621 4,437 2.9
Other................................. 6,332 11,628 7.6
------ -------- ----
Total Texas......................... 10,853 21,010 13.7
------ -------- ----
Other................................... 380 544 0.4
------ -------- ----
Total............................... 70,961 $153,712 100%
====== ======== ====
</TABLE>
Louisiana
The majority of our proved natural gas reserves are in the transition zone
of the south Louisiana producing region. This region refers to the geographic
area which covers the onshore and inland waters of south Louisiana, lying in
the southern half of the state of Louisiana, one of the world's most prolific
oil and natural gas producing sedimentary basins. The region generally contains
sedimentary sandstones, which are of high qualities of porosity and
permeabilities. There is a myriad of types of reservoir traps found in the
region. These traps are generally formed by faulting, folding and subsurface
salt movement or a combination of one or more of these.
The formations found in the southern Louisiana producing region range in
depth from 1,000 to 20,000 feet below the surface. These formations range from
the Sparta and Frio formations in the northern part of the region to Miocene
and Pleistocene formations in the southern part of the region. Our production
comes predominately from Miocene and Frio age formations.
Lafitte Field. The Lafitte field is located in Jefferson Parish, Louisiana
and was discovered in 1935 by Texaco. The Lafitte field is a large, north-south
elongated salt dome anticline feature. The productive sands are Miocene and
Pliocene age sands ranging in depth from 3,000 feet to approximately 12,000
feet. There are
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<PAGE>
currently 30 active producing wells in the field. Average daily production for
September 2000 was 1,504 gross (570 net) barrels of oil and 627 gross (231 net)
Mcf of gas.
In September 1999, we acquired an approximate 49% interest in the Lafitte
field with regards to the field's leases, surface facilities and equipment and
an approximate 45% average interest in the 31 active producing wells. In
November 1999, we acquired additional interests, resulting in an approximate
field-wide interest of 49%. The field met all of our acquisition criteria,
including being owned by a major oil and gas company who did not view the field
as a core property. Additionally, the Lafitte field had over 30 defined
productive reservoirs, a large cumulative production history of 1,890 Bcfe, a
large acreage position of over 8,000 acres and then current production of
approximately 4,500 Mcfe per day. After a thorough evaluation of the field, we
identified 45 projects that we believed would increase production. We have
already drilled one new well and performed five workovers and recompletions,
increasing our production from 4,500 Mcfe per day to approximately 9,000 Mcfe
per day currently. We have identified approximately 40 projects remaining to
exploit in the field. Stone Energy operates this field. See "Risk Factors--If
we are unable to resolve our dispute with the co-owner of the Lafitte field,
our ability to evaluate our participation in the development of this property
could be materially adversely affected."
Burrwood and West Delta Fields. The Burrwood and West Delta fields were
discovered in 1955 by Chevron. The fields lie upthrown to a large down-to-the-
southeast growth fault system with the structure striking northeast-southwest
and dipping northwestward in a counter-regional direction. The productive sands
are Miocene and Pliocene age sands ranging in depth from 6,300 feet to
approximately 11,700 feet. There are currently 10 active producing wells in the
fields. Average daily production for September 2000 was 5,148 gross (3,859 net)
Mcf of gas and 608 gross (454 net) barrels of oil.
In March 2000, we completed the acquisition of working interests in the
Burrwood and West Delta fields, for $1.2 million cash, the assumption of the
plugging and abandonment obligations associated with these fields, which we
have estimated to be $4.75 million, and the commitment to conduct a 3-D seismic
survey by June 2001, which will cost us $2.4 million. We acquired an
approximate 95% working interest of all rights from the surface to
approximately 10,600 feet and an approximate 47.5% working interest in the deep
rights below 10,600 feet. These contiguous fields collectively comprise
approximately 86,000 gross acres in Plaquemines Parish, Louisiana. At the time
of our acquisition, the Burrwood and West Delta fields had cumulative
production of 431 Bcfe, 16 productive reservoirs, significant infrastructure in
place, immediate development opportunities and potential deep reservoirs that
we believe may be identified with the use of 3-D seismic technology. The
Burrwood and West Delta fields are adjacent to several fields that have yielded
deep production from wells drilled below 10,600 feet. We are the operator of
this field. We have already performed five workovers and recompletions,
increasing our production from 4,000 Mcfe per day to approximately 11,000 Mcfe
per day currently.
Second Bayou Field. The Second Bayou field is located in Cameron Parish,
Louisiana and was discovered in 1955 by the Sun Texas Company. We are the
operator of nine producing wells, seven of which are completed in two separate
zones within the same well bore. We have an average working interest of
approximately 29% in 1,395 gross acres. To date, the field has produced over
423 Bcf of natural gas and 3 MMBbls of oil from multiple Miocene aged sands
ranging in depth from 4,000 feet to 15,200 feet. Other major operators in the
area are Fina, Texaco and Bellwether Exploration. Average daily production for
September 2000 was 1,636 gross (372 net) barrels of oil and 3,802 gross (902
net) Mcf of gas.
Pecan Lake Field. The Pecan Lake field was discovered in 1944 by the
Superior Oil Company. Geologically, the field is comprised of a relatively low
relief, four-way closure and multiple stacked pay sands. The Pecan Lake field
comprises approximately 870 gross acres in Cameron Parish, Louisiana,
approximately 42 miles southeast of Lake Charles, Louisiana. The field has
produced from over 15 Miocene sands ranging in depths from 7,500 feet to 11,800
feet, which have been predominately natural gas and natural gas condensate
reservoirs. These sand reservoirs are characterized by generally widespread
development and strong waterdrive production mechanisms. The field has produced
in excess of 350 Bcf of natural gas and 717 MBbls of
35
<PAGE>
condensate. All of the field production to date has come from normally
pressured reservoirs. We are the operator of five producing wells, with working
interests ranging from approximately 43% to 47%. Average daily production for
September 2000 was 4,624 gross (1,543 net) Mcf of gas and 64 gross (22 net)
barrels of oil.
Isle St. Jean Charles Field. The Isle St. Jean Charles field is located in
Terrebonne Parish, Louisiana. The field is a northwest extension of the Bayou
Jean LaCroix field located in the southeastern area of the Parish. These fields
are trapped on a four-way closure, downthrown on a major east-west, trending
down to the south fault. Production is from multiple Miocene-aged sands, which
are normally pressured and range in depth from 9,000 feet to 13,000 feet. The
field was developed primarily in the 1950s by Exxon, and reservoirs have
exhibited both depletion and water drive mechanisms. To date, these fields have
produced in excess of 53 Bcf of natural gas and 6.6 MMBbls of oil and
condensate. There are currently five active wells producing in these fields. We
acquired our working interest in our leasehold of approximately 212 gross acres
through both acreage acquisitions and a farmout from Fina. We are operator of
the field and hold an approximate 34% working interest. Average daily
production for September 2000 was 5,246 gross (1,380 net) Mcf of gas and 105
gross (27 net) barrels of oil.
Other. We maintain ownership interests in acreage and wells in several
additional fields in Louisiana, including the Lake Raccourci field, located in
Lafourche Parish; the Kings Ridge field, located in Lafourche Parish; the Ada
field, located in Bienville Parish; the Opelousas field, located in St. Landry
Parish; the Sibley field, located in Webster Parish; the City of Lake Charles
field, located in Calcasieu Parish; the Deep Lake field, located in Lafourche
Parish; the Mosquito Bay field, located in Terrebonne Parish; the South Pecan
Lake Field, located in Cameron Parish and the Charenton field, located in St.
Mary Parish.
Texas
Mary Blevins Field. The Mary Blevins field is located in Smith County,
Texas. It was a new discovery that is fault-separated from the Hitts Lake
field, discovered in 1953 by Sun Oil. Currently there are four producing wells
in the field with Goodrich, as operator, having an approximate 48% working
interest in 782 gross acres. Average daily production for September 2000 was
124 gross (50 net) barrels of oil.
Sean Andrew Field. The Sean Andrew field in West Texas produces from the
pinnacle Pennsylvania Reef and was discovered by us in 1994, utilizing our 375
square mile 3-D seismic database. There are currently three wells producing
approximately 250 barrels of oil per day, with our working interest averaging
approximately 37%. Average daily production for September 2000 was 134 gross
(36 net) barrels of oil and 60 gross (16 net) Mcf of gas.
Other. We maintain ownership interests in acreage and wells in several
additional fields in Texas including the Midway field, located in San Patricio
County; the Ackerly field, located in Dawson and Howard Counties; the Mathers
Ranch field, located in Hemphill County; the Marholl field, located in Dawson
County; the Lamesa Farms field, located in Dawson County; the Carthage
(Bethany) field, located in Panola County; the N.W. Ackerly field, located in
Dawson County; the East Jacksonville field, located in Cherokee County and the
Mott Slough field, located in Wharton County. Our primary exploration focus in
West Texas is on the western flank of the Horseshoe Atoll area in Dawson and
Gaines Counties.
Other Properties
We have an interest in two exploration permits in the Carnarvon Basin of
Western Australia.
EP-395. We acquired a 20% working interest in the 240 square kilometer
exploration permit in 1995. Since 1995, we have reprocessed the original 2-D
seismic data sets, shot a 38 kilometer 3-D seismic survey, and shot an
additional 93 kilometer of high quality 2-D seismic. Interpretation of this
data has confirmed two separate prospects: West Boyd and Lindsay. During 1999,
we farmed out our working interest for a 6.9% carried interest through the
drilling of the Boyd #1 well, which was a dry hole.
36
<PAGE>
EP-397. This permit is 160 square kilometers and we have a 33% working
interest. We have 130 square kilometers of available seismic data which has
been reprocessed and interpreted with several prospect leads.
Oil and Natural Gas Reserves
The table below presents our summary reserve information as of June 30,
2000. Estimates of our net proved reserves are based on a reserve report
prepared by Coutret & Associates, Inc., our independent reserve engineers.
<TABLE>
<CAPTION>
June 30, 2000
-------------
<S> <C>
Estimated net proved reserves:
Natural gas (MMcf)........................................... 30,743
Oil and condensate (MBbls)................................... 6,703
Total (MMcfe).............................................. 70,961
PV-10 Value (in thousands)................................... $153,712
Standardized Measure (in thousands).......................... 116,195
Proved developed reserves as percentage of total proved
reserves.................................................... 66.3%
</TABLE>
There are numerous uncertainties inherent in projecting future rates of
production and timing of development expenditures, including many factors
beyond our control. Reserve engineering is a subjective process of estimating
underground accumulations of oil, condensate and natural gas that cannot be
measured in an exact manner, and the accuracy of any reserve estimate is a
function of the quality of available data and of engineering and geological
interpretation and judgment. The quantities of oil and natural gas that are
ultimately recovered, production and operating costs, the amount and timing of
future development expenditures and future oil and natural gas sales prices may
all differ from those assumed in these estimates. Therefore, the present value
of future net revenues amounts shown above should not be construed as the
current market value of the estimated oil and natural gas reserves attributable
to our properties.
In accordance with the SEC's guidelines, the engineers' estimates of future
net revenues from our properties and the present value of future net revenues
thereof are made using oil and natural gas sales prices in effect as of the
dates of such estimates and are held constant throughout the life of the
properties, except where such guidelines permit alternate treatment, including
the use of fixed and determinable contract prices. The prices as of June 30,
2000 used in such estimates averaged $4.56 per Mcf of natural gas and $29.80
per Bbl of oil and condensate.
In 1998, proved natural gas reserves were revised downward primarily in
three fields: Lake Raccourci, Pecan Lake and Kings Ridge. Reserves were revised
downward in the Lake Raccourci and Pecan Lake fields due to premature depletion
as a result of reservoir pressure decline and increased water production. In
the Kings Ridge field, reserves were revised downward due to reduced producible
volumes of gas as a result of 1998 additional development drilling. In 1999,
proved natural gas reserves were revised downward in the Kings Ridge and Pecan
Lake fields. In both fields, reserves were revised downward as a result of
premature water production.
Title to Properties
We believe that we have satisfactory title to all of our producing
properties in accordance with standards generally accepted in the oil and
natural gas industry, subject to such exceptions as, in our opinion, are not so
material as to detract substantially from the use or value of such properties.
As is customary in the oil and gas industry, we perform only a preliminary
title investigation before leasing undeveloped properties. Accordingly, working
interest percentages and gross and net acreage amounts for undeveloped
properties are preliminary. However, a title opinion is typically obtained
before the commencement of drilling operations and any material defects in
title are remedied prior to the time actual drilling of a well is commenced. We
do not anticipate receiving title opinions on all of our properties, including
the Lafitte field. If we or the operator of a property
37
<PAGE>
are unable to remedy or cure any title defect of a nature such that it would
not be prudent to commence or continue operations on the property, we could
suffer a loss of a portion of, or our entire investment in, the property.
Our properties are subject to customary royalty interests, liens incident to
operating agreements, liens for current taxes, liens of vendors and lenders and
other burdens, which we do not believe materially interfere with the use of or
affect the value of our properties. We have mortgaged substantially all of our
assets, including our properties, to secure our borrowings under our bank
credit facility. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--Bank
Credit Facility" for further discussion.
Productive Wells
The following tables set forth the number of active well bores in which we
maintain ownership interests as of December 31, 1999:
<TABLE>
<CAPTION>
Oil Natural gas Total
------------ ------------ -------------
Gross Net(1) Gross Net(1) Gross Net(1)
----- ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
California.......................... -- -- 4.00 2.09 4.00 2.09
Colorado............................ -- -- 1.00 0.30 1.00 0.30
Louisiana........................... 41.00 18.68 29.00 10.60 70.00 29.28
Michigan............................ 2.00 0.26 5.00 0.05 7.00 0.31
Mississippi......................... -- -- 1.00 0.05 1.00 0.05
New Mexico.......................... -- -- 1.00 0.03 1.00 0.03
Texas............................... 25.00 11.93 4.00 0.63 29.00 12.56
Wyoming............................. 1.00 0.17 -- -- 1.00 0.17
----- ----- ----- ----- ------ -----
Total Productive Wells............ 69.00 31.04 45.00 13.75 114.00 44.79
===== ===== ===== ===== ====== =====
</TABLE>
--------
(1) Net working interest.
As of September 30, 2000, we had 132 gross and 59.84 net productive wells.
Productive wells consist of producing wells and wells capable of production,
including natural gas wells awaiting pipeline connections. A gross well is a
well in which we maintain an ownership interest, while a net well is deemed to
exist when the sum of the fractional working interests owned by us equals one.
Wells that are completed in more than one producing horizon are counted as one
well. Of the gross wells reported in the table above, eight had multiple
completions. Wells in which our interest is limited to a royalty or overriding
royalty interest are excluded from the table.
38
<PAGE>
Acreage
The following table summarizes our gross and net developed and undeveloped
oil and natural gas acreage under lease as of December 31, 1999. Acreage in
which our interest is limited to a royalty or overriding royalty interest is
excluded from the table. As denoted in the following table, gross acreage
refers to acres in which a working interest is owned, while a net acre is
deemed to exist when the sum of the fractional ownership working interests in
gross acres equals one.
<TABLE>
<CAPTION>
Developed Undeveloped
Acreage Acreage
------------ --------------
Gross Net Gross Net
------ ----- ------- ------
<S> <C> <C> <C> <C>
California....................................... 1,280 568 -- --
Colorado......................................... 640 192 -- --
Louisiana........................................ 15,007 6,120 1,069 640
Michigan......................................... 1,920 19 640 50
Texas............................................ 5,358 1,912 2,160 987
Wyoming.......................................... 80 13 -- --
Other............................................ -- -- 98,841 17,306
------ ----- ------- ------
Total.......................................... 24,285 8,824 102,710 18,983
====== ===== ======= ======
</TABLE>
Undeveloped acreage is considered to be those lease acres on which wells
have not been drilled or completed to a point that would permit the production
of commercial quantities of oil or natural gas, regardless of whether or not
such acreage contains proved reserves. As is customary in the industry, we can
retain our interest in undeveloped acreage by drilling activity that
establishes sufficient commercial production or by payment of delay rentals
during the remaining primary term. The oil and natural gas leases in which we
have an interest are for varying primary terms; however, most of our developed
lease acreage is beyond the primary term and is held by producing wells.
Drilling Activities
The following table sets forth our drilling activity for the last three
years. As denoted in the following table, gross wells refer to wells in which a
working interest is owned, while a net well is deemed to exist when the sum of
fractional ownership working interests in gross wells equals one.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998 1999
---------- ---------- ----------
Gross Net Gross Net Gross Net
----- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Development Wells:
Productive 6.00 2.55 6.00 2.77 1.00 0.49
Non-Productive............................ -- -- 2.00 1.47 -- --
----- ---- ----- ---- ---- ----
Total................................... 6.00 2.55 8.00 4.24 1.00 0.49
===== ==== ===== ==== ==== ====
Exploratory Wells:
Productive................................ 12.00 2.94 7.00 1.49 -- --
Non-Productive............................ 7.00 1.72 8.00 2.87 1.00 0.12
----- ---- ----- ---- ---- ----
Total................................... 19.00 4.66 15.00 4.36 1.00 0.12
===== ==== ===== ==== ==== ====
Total Wells:
Productive................................ 18.00 5.49 13.00 4.26 1.00 0.49
Non-Productive............................ 7.00 1.72 9.00 4.34 1.00 0.12
----- ---- ----- ---- ---- ----
Total................................... 25.00 7.21 22.00 8.60 2.00 0.61
===== ==== ===== ==== ==== ====
</TABLE>
From January 1, 2000 to September 30, 2000, we drilled seven gross (3.82
net) wells and successfully completed five gross (2.70 net) of those wells.
39
<PAGE>
Net Production, Unit Prices and Costs
The following table presents certain information with respect to our oil,
natural gas and condensate production and the revenue derived from the sale of
such production, average sales prices received and average production costs for
the periods presented:
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
----------------------- -----------------
1997 1998 1999 1999 2000
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Production:
Natural gas (MMcf)................. 2,449 2,783 2,931 2,240 2,453
Oil and condensate (MBbls)......... 282 317 394 287 436
Total (MMcfe).................... 4,144 4,683 5,297 3,963 5,067
Average sales price per unit:
Natural gas--
Revenues from production (per
Mcf)............................ $ 2.55 $ 2.18 $ 2.40 $ 2.25 $ 3.66
Effects of hedging activities
(per Mcf)....................... -- -- 0.01 -- (0.09)
------- ------- ------- -------- --------
Average price (per Mcf).......... $ 2.55 $ 2.18 $ 2.41 $ 2.25 $ 3.57
------- ------- ------- -------- --------
Oil and condensate--
Revenues from production (per
Bbl)............................ $ 18.06 $ 11.88 $ 16.88 $ 14.47 $ 28.56
Effects of hedging activities
(per Bbl)....................... -- -- -- -- (3.54)
------- ------- ------- -------- --------
Average price (per Bbl).......... 18.06 11.88 16.88 14.47 25.02
------- ------- ------- -------- --------
Total revenues from production (per
Mcfe)............................. $ 2.74 $ 2.10 $ 2.58 $ 2.32 $ 4.23
Effects of hedging activities (per
Mcfe)............................. -- -- 0.01 -- (0.35)
------- ------- ------- -------- --------
Total average price (per
Mcfe)......................... $ 2.74 $ 2.10 $ 2.59 $ 2.32 $ 3.88
======= ======= ======= ======== ========
Expenses (per Mcfe):
General and administrative......... $ 0.63 $ 0.51 $ 0.38 $ 0.41 $ 0.34
Lease operating expenses (excluding
production taxes)................. 0.40 0.48 0.51 0.37 0.67
Production taxes................... 0.16 0.13 0.17 0.13 0.32
Depreciation, depletion and
amortization-oil and natural gas
properties........................ 1.17 0.87 0.89 0.90 0.83
Reserve Life Index (in years)(1)... 15.0x 10.0x 12.7x N/A N/A
</TABLE>
--------
(1) Calculated by dividing period-end proved reserves by production for the
prior fiscal year. Our 1999 reserves include the Burrwood and West Delta
acquisitions on a pro forma basis.
Capital Expenditures
The following table reflects certain data with respect to oil and natural
gas property acquisitions, exploration and development activities:
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended
----------------------------------- September 30,
1997 1998 1999 2000
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Property acquisition
Proved...................... $17,308,540 $ 129,325 $10,136,298 $ 1,198,631
Unproved.................... 886,647 2,446,474 498,391 496,492
Exploration................... 5,535,783 8,718,682 1,634,299 1,554,520
Development................... 3,598,177 8,169,741 1,960,371 8,732,162
----------- ----------- ----------- -----------
$27,329,147 $19,464,222 $14,229,359 $11,981,805
=========== =========== =========== ===========
</TABLE>
40
<PAGE>
Oil and Natural Gas Marketing and Major Customers
Marketing
Substantially all of our production is in mature producing fields with
extensive networks of gathering systems and pipelines. These gathering systems
and pipeline networks provide the necessary transportation infrastructure to
distribute our production. Our production is generally sold at the wellhead to
oil and natural gas purchasing companies in the areas where it is produced. We
operate in oil and gas producing regions where buyers of oil and gas are
plentiful. Our oil and natural gas condensate is generally sold month to month
on the spot market. Currently, nearly all of our natural gas is sold at the
wellhead at spot market prices. The term "spot market" refers to contracts with
terms of six months or less or contracts which call for a redetermination of
sales prices every six months or earlier. We believe that the loss of one or
more of our current natural gas spot purchasers should not have a material
adverse effect on our business because any individual spot purchaser could be
readily replaced by another spot purchaser who would pay approximately the same
sales price.
Customers
Due to the nature of the industry, we sell our oil and natural gas
production to a limited number of purchasers and, accordingly, amounts
receivable from such purchasers could be significant. Revenues from these
sources as a percent of total revenues for the periods presented were as
follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Seaber Corporation of Louisiana............................... 37% 47% 44%
Equiva Trading................................................ 27 12 11
Texla Energy Management....................................... 10 -- --
Navajo Refining Company....................................... 7 11 --
Mobil Oil Corporation......................................... -- -- 10
Mitchell Marketing Company.................................... -- -- 9
</TABLE>
Competition
The oil and natural gas industry is highly competitive. Major and
independent oil and natural gas companies, drilling and production acquisition
programs and individual producers and operators are active bidders for
desirable oil and natural gas properties, as well as the equipment and labor
required to operate those properties. Many competitors have financial resources
substantially greater than we do, and staffs and facilities substantially
larger than ours.
Regulations
Our business can be affected by a number of regulatory policies, including
the regulation of production, federal and state regulations governing
environmental quality and pollution control, state limits on allowable rates of
production by a well or proration unit and incentives to promote alternative or
competitive fuels. For example, a productive natural gas well may be "shut-in"
because of an oversupply of natural gas or the lack of an available natural gas
pipeline in the areas in which we may conduct operations. State and federal
regulations generally are intended to prevent waste of oil and natural gas,
protect rights to produce oil and natural gas between owners in a common
reservoir, control the amount of oil and natural gas produced by assigning
allowable rates of production and control contamination of the environment.
Pipelines are subject to the jurisdiction of various federal, state and local
agencies as well.
Federal Regulation of Natural Gas. Historically, the transportation and sale
for resale of natural gas in interstate commerce have been regulated pursuant
to the Natural Gas Act of 1938, the Natural Gas Policy Act of 1978, and the
regulations promulgated thereunder by the Federal Energy Regulatory Commission.
In the
41
<PAGE>
past, the federal government has regulated the prices at which natural gas
could be sold. In 1989, Congress enacted the Natural Gas Wellhead Decontrol Act
which removed all Natural Gas Act and Natural Gas Policy Act price and non-
price controls affecting wellhead sales of natural gas effective January 1,
1993. Congress could, however, reenact price controls in the future.
Our sales of natural gas are affected by the availability, terms and cost of
pipeline transportation. The price and terms for access to pipeline
transportation remain subject to extensive federal regulation. Commencing in
April 1992, the Federal Energy Regulatory Commission issued Order No. 636 and a
series of related orders, which required interstate pipelines to provide open-
access transportation on a basis that is equal for all natural gas pipeline
suppliers. The Federal Energy Regulatory Commission has stated that it intends
for Order No. 636 and its future restructuring activities to foster increased
competition within all phases of the natural gas industry. Although Order No.
636 does not directly regulate our production and marketing activities, it does
affect how buyers and sellers gain access to the necessary transportation
facilities and how we and our competitors sell natural gas in the marketplace.
The courts have largely affirmed the significant features of Order No. 636
and the numerous related orders pertaining to individual pipelines, although
some appeals remain pending and the Federal Energy Regulatory Commission
continues to review and modify its regulations regarding the transportation of
natural gas. For example, the Federal Energy Regulatory Commission recently
issued Order Nos. 637, 637-A and 637-B, which, among other things (i) lift the
cost-based cap on pipeline transportation rates in the capacity release market
until September 30, 2002, for short-term releases of pipeline capacity of less
than one year, (ii) permit pipelines to charge different maximum cost-based
rates for peak and off-peak periods, (iii) encourage, but do not mandate,
auctions for pipeline capacity, (iv) require pipelines to implement imbalance
management services, (v) restrict the ability of pipelines to impose penalties
for imbalances, overruns and non-compliance with operational flow orders, and
(vi) implement a number of new pipeline reporting requirements. These orders
also require the Federal Energy Regulatory Commission Staff to analyze whether
the Federal Energy Regulatory Commission should implement additional
fundamental policy changes, including, among other things, whether to pursue
performance-based ratemaking or other non-cost based ratemaking techniques and
whether the Federal Energy Regulatory Commission should mandate greater
standardization in terms and conditions of service across the interstate
pipeline grid. In addition, in February 2000, the Federal Energy Regulatory
Commission implemented regulations governing the procedure for obtaining
authorization to construct new pipeline facilities and has issued a policy
statement, which it largely affirmed in a recent order on rehearing,
establishing a presumption in favor of requiring owners of new pipeline
facilities to charge rates based solely on the costs associated with such new
pipeline facilities. We cannot predict what further action the Federal Energy
Regulatory Commission will take on these matters, nor can we accurately predict
whether the Federal Energy Regulatory Commission's actions will achieve the
goal of increasing competition in markets in which our natural gas is sold.
However, we do not believe that any action taken will affect us in a way that
materially differs from the way it affects other natural gas producers and
marketers.
Commencing in May 1994, the Federal Energy Regulatory Commission issued a
series of orders that, among other matters, slightly narrowed its statutory
tests for establishing gathering status and reaffirmed that, except in
situations in which the gatherer acts in concert with an interstate pipeline
affiliate to frustrate the Federal Energy Regulatory Commission's
transportation policies, it does not generally have jurisdiction over natural
gas gathering facilities and services, and that such facilities and services
located in state jurisdictions are properly regulated by state authorities.
This Federal Energy Regulatory Commission action may further encourage
regulatory scrutiny of natural gas gathering by state agencies. We do not
believe that we will be affected by the Federal Energy Regulatory Commission's
new gathering policy any differently than other producers and marketers.
Additional proposals and proceedings that might affect the natural gas
industry are pending before Congress, the Federal Energy Regulatory Commission
and the courts. The natural gas industry historically has been very heavily
regulated; therefore, there is no assurance that the less stringent regulatory
approach recently pursued by the Federal Energy Regulatory Commission and
Congress will continue.
42
<PAGE>
Oil Price Controls and Transportation Rates. Sales of crude oil, condensate
and natural gas liquids by us are not currently regulated and are made at
market prices. In a number of instances, however, the ability to transport and
sell such products are dependent on pipelines whose rates, terms and conditions
of service are subject to Federal Energy Regulatory Commission jurisdiction
under the Interstate Commerce Act. Certain regulations implemented by the
Federal Energy Regulatory Commission in recent years could result in an
increase in the cost of transportation service on certain petroleum products
pipelines. However, we do not believe that these regulations affect us any
differently than other natural gas producers and marketers.
State Regulation of Oil and Gas Production. State statutes and regulations
require permits for drilling operations, drilling bonds and reports concerning
operations. In addition, there are state statutes, rules and regulations
governing conservation matters, including the unitization or pooling of oil and
gas properties, establishment of maximum rates of production from oil and gas
wells and the spacing, plugging and abandonment of such wells. Such statutes
and regulations may restrict the rate at which oil and gas could be produced
from our properties and may restrict the number of wells that may be drilled on
a particular lease or in a particular field.
Environmental Regulation
Numerous and complex federal, state and local laws and regulations covering
the discharge of materials into the environment, or otherwise relating to the
protection of the environment, may affect our operations and costs as a result
of their effect on oil and natural gas development, exploration and production
operations. These laws and regulations can restrict or prohibit our activities
that affect the environment in many ways, such as requiring that we acquire a
permit before we begin to drill; restricting the way we can release wastes into
the air, water, or soils; limiting or prohibiting our drilling activities in
sensitive areas such as wetlands; and imposing substantial liabilities on us
for pollution resulting from our operations. Failure to comply with these laws
and regulations may result in the imposition of administrative, civil and
criminal penalties, injunctions, and investigatory and remedial requirements.
It is not anticipated that we will be required in the near future to expend
amounts that are material in relation to our total capital expenditures program
by reason of environmental laws and regulations but, inasmuch as such
regulations are frequently changed by both federal and state entities, we are
unable to predict the ultimate cost of continued compliance.
State statutes and regulations require permits for drilling operations,
drilling bonds and reports concerning operations. In addition, there are state
statutes, rules and regulations governing conservation matters, including the
unitization or pooling of oil and natural gas properties, establishment of
maximum rates of production from oil and natural gas wells and the spacing,
plugging and abandonment of such wells. Such statutes and regulations may limit
the rate at which oil and natural gas could otherwise be produced from our
properties and may restrict the number of wells that may be drilled on a
particular lease or in a particular field.
We could incur liability under the Comprehensive Environmental Response,
Compensation and Liability, Act or CERCLA, also known as "Superfund," and
comparable state laws, regardless of our fault, in connection with the disposal
or other release of hazardous substances, including those arising out of
historical operations of our predecessors. Under CERCLA, we could be subject to
joint and several liability for the costs of cleaning up hazardous substances,
for damages to natural resources, and for the costs of certain health studies.
Moreover, it is not uncommon for neighboring landowners and other third parties
to file claims for personal injury and property damage allegedly caused by the
release of hazardous substances or other pollutants into the environment.
Please see the "Legal and Regulatory Proceedings" section, which discusses our
identification as a potentially responsible party at a Superfund site in
Vermilion Parish, Louisiana.
We currently own or lease properties where hydrocarbons are being or have
been handled for many years. Although we have utilized operating and disposal
practices that were standard in the industry at the time, hydrocarbons or other
wastes may have been disposed of or released on or under the properties owned
or leased by us or on or under other locations where these wastes have been
taken for disposal. In addition, many of these properties have been operated by
third parties whose treatment and disposal or release of hydrocarbons
43
<PAGE>
or other wastes was not under our control. Under various state and federal
environmental laws, we could be required to remove or remediate previously
disposed wastes (including wastes disposed of or released by prior owners or
operators), to clean up contaminated property (including contaminated surface
or groundwater) or to perform remedial plugging operations to prevent future
contamination.
In addition, we could incur liability under the Oil Pollution Act with
respect to any spills of oil into navigable waters of the United States.
Responsible parties under the Oil Pollution Act may be subject to strict, joint
and potentially unlimited liability for removal costs and certain other
consequences of such an oil spill. In addition to the Oil Pollution Act, the
Federal Water Pollution Control Act and analogous state laws impose
restrictions and strict controls regarding the discharge of pollutants into
navigable waters, with substantial potential liabilities imposed for the costs
of removal of pollutants and damages to the environment.
Legal and Regulatory Proceedings
The U.S. Environmental Protection Agency has identified us as a potentially
responsible party for the cost of clean-up of hazardous substances at an oil
field waste disposal site in Vermilion Parish, Louisiana. We estimate that the
remaining cost of long-term clean-up of the site will be approximately $3.5
million, with our percentage of responsibility as estimated by the EPA, to be
approximately 3.05%. As of September 30, 2000, we had paid $321,000 in costs
related to this matter and accrued $122,500 for the remaining liability. These
costs have not been discounted to their present value. The EPA and the
potential responsible parties will continue to evaluate the site and may revise
estimates for the long-term clean-up of the site.
While we believe that our current level of involvement with this site will
not have a material adverse effect on our operations, there can be no assurance
that the cost of clean-up or our percentage responsibility will not be higher
than currently estimated. In addition, under CERCLA, the liability costs for
the clean-up of the site is joint and several among all potentially responsible
parties. Therefore, the ultimate cost of the clean-up to us could be
significantly higher than the amount presently estimated or accrued for this
liability.
In connection with our acquisition of an approximate 49% working interest in
the Lafitte field, we became joint owners with Stone Energy Corporation, which
acquired an approximate 51% working interest and is operator of the Lafitte
field. On February 28, 2000, we commenced two suits against Stone Energy in
state district courts in Harris County, Texas and Jefferson Parish, Louisiana,
alleging certain items of misconduct and violations of the agreements
associated with the joint acquisition and seeking specific performance and
damages.
We are party to additional lawsuits arising in the normal course of
business. We intend to defend these actions vigorously and believe, based on
currently available information, that adverse results or judgments from such
actions, if any, will not be material to our financial position or results of
operations.
44
<PAGE>
MANAGEMENT
Officers and Directors
Our executive officers and directors and their ages and positions as of
December 31, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Walter G. "Gil" Goodrich.. 42 President, Chief Executive Officer and Director
Robert C. Turnham, Jr..... 42 Executive Vice President and Chief Operating Officer
Roland L. Frautschi....... 43 Senior Vice President, Chief Financial Officer and Treasurer
Henry Goodrich............ 70 Chairman of the Board of Directors
Sheldon Appel............. 66 Director
Jeff H. Benhard........... 71 Director
Donald M. Campbell........ 61 Director
Patrick E. Malloy, III.... 58 Director
Michael Y. McGovern....... 49 Director
Arthur A. Seeligson....... 42 Director
</TABLE>
Walter G. "Gil" Goodrich has served as our President and Chief Executive
Officer since August 1995. Mr. Goodrich was Goodrich Oil Company's Vice
President of Exploration from 1985 to 1989 and its President from 1989 to
August 1995. He joined Goodrich Oil Company as an exploration geologist in
1980. Gil Goodrich is the son of Henry Goodrich. He has served as one of our
directors since August 15, 1995.
Robert C. Turnham, Jr. has served as our Executive Vice President and Chief
Operating Officer since August 1995. He has held various positions in the oil
and natural gas business since 1981. From 1981 to 1984, Mr. Turnham served as
a financial analyst for Pennzoil. In 1984, he formed Turnham Interests, Inc.
to pursue oil and natural gas investment opportunities. From 1993 to August
1995, he was a partner in and served as President of Liberty Production
Company, an oil and natural gas exploration and production company.
Roland L. Frautschi has served as our Senior Vice President, Chief
Financial Officer and Treasurer since August 1995. He was employed by Goodrich
Oil Company from 1982 to August 1995. During that time, he served Goodrich Oil
Company in a number of capacities, including internal auditor, controller, and
from 1990 to August 1995, as Vice President of Finance.
Henry Goodrich is the chairman of our board of directors. He is a petroleum
geologist with over 45 years experience in the oil and natural gas industry.
Mr. Goodrich served as an exploration geologist with the Union Producing
Company and McCord Oil Company. From 1971 to 1975, Mr. Goodrich was President,
Chief Executive Officer and a partner of McCord-Goodrich Oil Company. In 1975,
Mr. Goodrich formed Goodrich Oil Company. He was elected to our board in
August 1995, and elected as Chairman of our board in March 1996. Mr. Goodrich
is also a director of Pan American Life Insurance Company. Henry Goodrich is
the father of Gil Goodrich.
Sheldon Appel has been involved in real estate development and finance
since 1955 when he formed the Sheldon Appel Company. Mr. Appel is a private
investor and a former director of American Consumer Products and Beverly Hills
Savings and Loan, both of which are listed on the NYSE. He has been one of our
directors since August 1995.
Jeff H. Benhard has been the President and Chief Executive Officer since
1949 of a number of businesses owned by the Benhard family, including Benhard
Grain, Inc., Peoples Moss Gin Co., Inc. and Louisiana Premium Seafoods, Inc.
Mr. Benhard has been involved in the agriculture and aquaculture businesses
since 1949. He has been a director of the Pan American Life Insurance Company
since 1989 and was the President of the LSU Foundation from 1991 to 1992. Mr.
Benhard became a director of Goodrich at its inception in August 1995. He
resigned from the board of directors in December 1996 and was reelected to the
board of directors in May 1997.
45
<PAGE>
Donald M. Campbell has been Chief Executive Officer of Hambrecht & Quist
Guaranty Finance L.L.C., a subsidiary of the Chase Manhattan Corporation
following its acquisition of Hambrecht & Quist, since 1995. He is also a
director of the Moneda Chile Fund (listed on the Irish Stock Exchange) and
Evergreen Forests Ltd. (listed on the New Zealand and Australian Stock
Exchanges), and is the chairman of The New Zealand Investment Trust (listed on
the London Stock Exchange). He has been a financial officer of two public
corporations, and has been a principal in the formation of four private
companies in the United States. He has served as one of our directors since
November 1999, when he was elected by the holders of our subsidiaries' notes
pursuant to our agreement with H&Q Guaranty as noteholder agent.
Patrick E. Malloy, III has been President and Chief Executive Officer of
Malloy Enterprises, Inc., a real estate and investment holding company, and
Malloy Real Estate, Inc. since 1973. In addition, Mr. Malloy has served as a
director of North Fork Bancorp (NYSE) since 1998 and was Chairman of the Board
of New York Bancorp (NYSE) from 1991 to 1998. He joined our Board in May 2000.
Michael Y. McGovern has been the Chief Executive Officer of Coho Energy
Resources, Inc. since April 2000. Prior to that he was the Managing Director
for Pembrook Capital Corporation, Inc. from 1998 to January 2000, which
provided advisory services to parties involved with distressed energy
companies. He has also been a director and founding investor of Greystar
Corporation since 1995, which provides production management services to oil
and natural gas companies. He has served as one of our directors since
September 1999, when he was elected by the holders of our subsidiaries' notes
pursuant to our agreement with H&Q Guaranty as noteholders agent.
Arthur A. Seeligson is currently engaged in the management of his personal
investments. From 1991 to 1993, Mr. Seeligson was a Vice President, Energy
Corporate Finance at Schroder Wertheim & Company, Inc. From 1993 to 1995, Mr.
Seeligson was a Principal, Corporate Finance, at Wasserstein, Perella & Co. He
was primarily engaged in the management of his personal investments from 1995
through 1997. He was a managing director with the investment banking firm of
Harris, Webb & Garrison from 1997 to June 2000. He has served as one of our
directors since August 1995.
Board of Directors and Executive Officers
Our board of directors currently has eight members. The terms of the office
of the board of directors are divided into three classes: Class I, the members
of which are Messrs. Appel, Benhard and Campbell, whose terms will expire at
the annual meeting of stockholders to be held in 2002; Class II, the members of
which are Messrs. Henry Goodrich and Malloy, whose terms will expire at the
annual meeting of stockholders to be held in 2003; and Class III, the members
of which are Messrs. Gil Goodrich, Seeligson and McGovern, whose terms will
expire at the annual meeting of the stockholders to be held in 2001. The
classification of the board of directors may have the effect of delaying or
preventing changes in our control or in our management. All of our officers
serve at the discretion of the board of directors.
Board Committees
Our board of directors has three standing committees, the membership and
functions of which are described below:
Executive Committee. The members of the Executive Committee are Messrs. Gil
Goodrich and Henry Goodrich. The Executive Committee is delegated the authority
to approve any actions that the board of directors could approve, except to the
extent restricted by law or by our Certificate of Incorporation or Bylaws.
Audit Committee. The members of the Audit Committee are Messrs. Appel,
Benhard and McGovern. Mr. Appel is chairman of the Audit Committee. The
functions of the Audit Committee are to recommend to the board of directors the
firm of independent public accountants to be engaged to audit our financial
statements, meet with the auditors and our financial management to review with
them our significant accounting policies
46
<PAGE>
and its internal controls, provide opportunities for the auditors to meet with
the Audit Committee and our officers, discuss matters discussed at Audit
Committee meetings with the full board of directors, investigate any matters
brought to its attention within the scope of its duties, review and assess the
adequacy of the Audit Committee charter on an annual basis, and have general
responsibility in connection with related matters.
Compensation Committee. Members of the Compensation Committee are Messrs.
Appel, Campbell and Seeligson, with Mr. Appel serving as its chairman. The
Compensation Committee's functions include the general review of our
compensation and benefit plans to ensure that they meet corporate objectives.
In addition, the Compensation Committee makes recommendations to the board of
directors on compensation of all of our officers, granting of awards under and
administering our stock option and other benefit plans, and adopting and
changing our major compensation policies and practices.
Director Compensation
General
For serving as a member of our board of directors, each director who is not
an officer or consultant of our company or our subsidiaries has been paid
$1,000 for each meeting attended. In addition, directors were reimbursed for
their reasonable out-of-pocket expenses incurred in connection with travel to
meetings of our board of directors or committees thereof and received periodic
grants of options to purchase common stock. Directors did not receive
compensation for serving on committees.
Nonemployee Directors Compensation Plan
The Goodrich Petroleum Corporation Directors Compensation Plan (the
"Directors Compensation Plan") provides for both discretionary option and
formula option grants and is administered by our board of directors, which may
delegate all of its power of administration, with the exception of the power to
authorize issuance of options. No director may vote or decide upon any matter
relating solely to such director under the Directors Compensation Plan, nor may
any director vote in any case in which the director's individual right to claim
any benefit under the Directors Compensation Plan is particularly involved.
The Directors Compensation Plan provides that options may only be granted to
non-employee directors. The Directors Compensation Plan further provides that
as of the effective date of the plan, an option to purchase 20,000 shares of
common stock will automatically be granted to each non-employee director. Each
non-employee director who is elected or appointed to our board after the
effective date of the plan will automatically receive upon such election or
appointment an option to purchase 20,000 shares of common stock. The Directors
Compensation Plan also provides for the annual issuance of options to purchase
10,000 shares of common stock to each non-employee director on the date of our
annual meeting of stockholders.
The maximum number of shares of common stock that may be issued under the
Directors Compensation Plan is 500,000. If, as of any date that the plan is in
effect, there are not sufficient shares of stock available under the plan to
allow for the automatic grant to each non-employee director of an option for
the purchase of shares, the plan will terminate. The exercise price of an
option shall be the fair market value of the stock on the date of grant for
both discretionary option grants and formula option grants.
The Directors Compensation Plan contains provisions whereby the board of
directors may make adjustments to the number of shares of common stock to be
acquired upon exercise of options in the event of a stock split, combination or
stock dividend.
The Directors Compensation Plan may be amended or terminated at any time by
the board of directors. Such amendment or termination will not impair the
rights of a nonemployee director or affect options previously granted and
outstanding under the Directors Compensation Plan.
47
<PAGE>
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee is currently, or has been at any
time since our formation, one of our officers or employees. No member of our
compensation committee serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of our board of directors or Compensation Committee.
Executive Compensation and Other Information
The following table summarizes certain information with respect to the
compensation earned by our executive officers for services rendered in all
capacities during the years indicated:
<TABLE>
<CAPTION>
Long-Term
Compensation--
Annual Securities
Compensation(1) Underlying
Name and Principal Fiscal ---------------- Options All Other
Position Year Salary Bonus (Number)(3) Compensation(2)
------------------ ------ -------- ------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Walter G. Goodrich...... 2000 $150,344 $70,000 145,000 $4,500
President and 1999 150,196 -- 87,288 4,500
Chief Executive Officer 1998 150,000 -- 26,800 3,225
Robert C. Turnham, Jr... 2000 $ 94,003 $50,000 70,000 $3,150
Executive Vice 1999 97,838 -- 48,310 2,929
President and 1998 97,889 -- 16,080 2,929
Chief Operating Officer
Roland L. Frautschi..... 2000 $ 87,832 $40,000 50,000 $2,620
Senior Vice President 1999 87,539 -- 51,498 2,620
and Chief Financial 1998 87,589 -- 16,080 2,620
Officer
</TABLE>
--------
(1) During the years presented, perquisites for the persons named in the
Summary Compensation Table aggregated less than 10% of the total annual
salary and bonus reported for such individual in the Summary Compensation
Table. Accordingly, no such amounts are included in the Summary
Compensation Table.
(2) Amounts represent matching contributions by us to the executive officer's
SIMPLE IRA accounts.
(3) Options granted prior to 1999 were surrendered in February 1999. See "--
Stock Option Exercises and Year End Holdings."
Goodrich Petroleum Corporation 1995 Stock Option Plan ("Goodrich Plan")
The Goodrich Plan provides for the granting of options (either incentive
stock options within the meaning of Section 422(b) of the Internal Revenue Code
of 1986, as amended (the "Code"), or options that do not constitute incentive
stock options ("nonqualified stock options"), restricted stock awards, stock
appreciation rights, long-term incentive awards and phantom stock awards, or
any combination thereof. The Goodrich Plan covers an aggregate of 375,000
shares of common stock (subject to certain adjustments in the event of stock
dividends, stock splits and certain other events). No more than 62,500 shares
of common stock, subject to adjustments, may be issued pursuant to grants made
under the Goodrich Plan to any one employee in any one year.
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 shares subject to options affected was 235,698.
Administration
The Goodrich Plan is administered by the Compensation Committee. The
Compensation Committee has the power to determine which employees will receive
an award, the time or times when such award will be
48
<PAGE>
made, the type of award and the number of shares of common stock to be issued
under the award or the value of the award. Only persons who at the time of the
grant are our employees or consultants are eligible to receive grants under the
Goodrich Plan.
Options
The Compensation Committee will designate the employees to receive the
options, the number of shares subject to the options and the terms and
conditions of each option granted under the Goodrich Plan. The term of any
option granted under the Goodrich Plan shall be determined by the Compensation
Committee; provided, however, that the term of any incentive stock option
cannot exceed ten years from the date of the grant and any incentive stock
option granted to an employee who possesses more than 10% of the total combined
voting power of all classes of our stock or of our subsidiaries within the
meaning of Section 422(b)(6) of the Code must not be exercisable after the
expiration of five years from the date of grant. The exercise price per share
of common stock granted under the Goodrich Plan as options is determined by the
Compensation Committee; provided, however, that such exercise price cannot be
less than the fair market value of a share of common stock on the date the
option is granted (subject to adjustments). Further, the exercise price of any
incentive stock option granted to an employee who possesses more than 10% of
the total combined voting power of all classes of our stock or of our
subsidiaries within the meaning of Section 422(b)(6) of the Code must be at
least 110% of the fair market value of the shares at the time such option is
granted. The exercise price of options granted under the Goodrich Plan is paid
in full in a manner prescribed by the Compensation Committee.
Restricted Stock Awards
Pursuant to a restricted stock award, shares of common stock will be issued
or delivered to the employee at any time the award is made without any cash
payment to us, except to the extent otherwise provided by the Compensation
Committee or required by law; provided, however, that such shares will be
subject to certain restrictions on the disposition thereof and certain
obligations to forfeit such shares to us as may be determined in the discretion
of the Compensation Committee. The restrictions on disposition may lapse based
upon (1) our attainment of specific performance targets established by the
Compensation Committee, such as
. the price of a share of common stock,
. our earnings per share,
. our revenue,
. the revenue of one of our business units designated by the Compensation
Committee,
. the return on stockholders' equity achieved by us, or
. our pre-tax cash flow from operations;
(2) the grantee's tenure with us; or (3) a combination of both factors. We
retain custody of the shares of common stock issued pursuant to a restricted
stock award until the disposition restrictions lapse. An employee may not sell,
transfer, pledge, exchange, hypothecate or otherwise dispose of such shares
until the expiration of the restriction period. However, upon the issuance to
the employee of shares of common stock pursuant to a restricted stock award,
except for the foregoing restrictions, such employee will have all the rights
of one of our stockholders with respect to such shares, including the right to
vote such shares and to receive all dividends and other distributions paid with
respect to such shares.
Stock Appreciation Rights
A stock appreciation right permits the holder to receive an amount (in cash,
common stock or a combination thereof) equal to the number of stock
appreciation rights exercised by the holder multiplied by the excess of the
fair market value of common stock on the exercise date over the stock
appreciation rights' exercise price. Stock appreciation rights may or may not
be granted in connection with the grant of an option,
49
<PAGE>
and no stock appreciation right may be exercised earlier than six months from
the date of grant. A stock appreciation right may be exercised in whole or in
such installments and at such times as determined by the Compensation
Committee.
Long-Term Incentive and Phantom Stock Awards
The Goodrich Plan permits grants of long-term incentive awards ("performance
awards") and phantom stock awards, which may be paid in cash, common stock or a
combination thereof as determined by the Compensation Committee. Performance
awards granted under the Goodrich Plan have a maximum value established by the
Compensation Committee at the time of the grant. A grantee's receipt of such
amount is contingent upon satisfaction by us, or any subsidiary, division or
department thereof, of future performance conditions established by the
Compensation Committee prior to the beginning of the performance period. Such
performance awards, however, shall be subject to later revisions as the
Compensation Committee shall deem appropriate to reflect significant unforeseen
events or changes. A performance award will terminate if the grantee's
employment with us terminates during the applicable performance period. Phantom
stock awards granted under the Goodrich Plan are awards of common stock or
rights to receive amounts equal to share appreciation over a specific period of
time. Such awards vest over a period of time or upon the occurrence of a
specific event(s) (including, without limitation, a change of control)
established by the Compensation Committee, without payment of any amounts by
the holder thereof (except to the extent required by law) or satisfaction of
any performance criteria or objectives. A phantom stock award terminates if the
grantee's employment with us terminates during the applicable vesting period
or, if applicable, the occurrence of a specific event(s), except as otherwise
provided by the Compensation Committee at the time of grant. In determining the
value of performance awards or phantom stock awards, the Compensation Committee
shall take into account the employee's responsibility level, performance,
potential, other awards under the Goodrich Plan and such other consideration as
it deems appropriate. Such payment may be made in a lump sum or in installments
as prescribed by the Compensation Committee. Any payment made in common stock
will be based upon the fair market value of the common stock on the payment
date.
Stock Option Grants in Last Fiscal Year
The following table sets forth information concerning stock options granted
during 2000 to the executive officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Potential
realizable value
at assumed annual
rates of stock
price
appreciation for
Individual grants option term
------------------------------------------- -----------------
Number of Percent of
securities options Exercise
underlying granted to or base
options employees in price Expiration
Name granted fiscal year ($/Sh) date 5% 10%
---- ---------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Walter G. Goodrich...... 145,000 24% $5.36 05/18/2005 $214,726 $474,488
Robert C. Turnham, Jr... 70,000 12% $4.88 05/18/2010 $214,610 $543,865
Roland L. Frautschi..... 50,000 8% $4.88 05/18/2010 $153,293 $388,475
</TABLE>
Stock Option Exercises and Year-End Holdings
During 2000 the named executive officers exercised the following stock
options: Walter G. Goodrich exercised 62,288 stock options at an exercise price
of $0.83 per share, Robert C. Turnham, Jr. exercised 30,810 stock options at an
exercise price of $0.75 per share and Roland L. Frautschi exercised 35,498
stock options at an exercise price of $0.75 per share.
50
<PAGE>
The following table sets forth information concerning stock option holdings
and the value of unexercised in-the-money stock options held by our executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Number of Shares
Underlying Unexercised Value of Unexercised
Options Held at In-the-Money Options Held
December 31, 2000 at December 31, 2000(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Walter G. Goodrich...... 12,500 157,500 $27,938 $27,938
Robert C. Turnham, Jr... 5,833 81,667 14,554 46,609
Roland L. Frautschi..... 5,333 60,667 13,307 39,114
</TABLE>
--------
(1) Computed based on the difference between aggregate fair market
value and aggregate exercise price. The fair market value of our
common stock on December 31, 2000 was $5.125 per share based on
the closing sales price on the NYSE on such date.
51
<PAGE>
TRANSACTIONS WITH OUR MANAGEMENT
AND SECURITYHOLDERS
In connection with our private placement in September 1999, we paid a
placement fee of $900,000 to affiliates of H&Q Guaranty, which became a
significant holder of our securities as a result of its purchases in this
transaction. The securities sold in the private placement consisted of
convertible notes issued by two subsidiaries, preferred units issued by a
subsidiary and warrants to purchase our common stock. Concurrently with this
transaction, Mr. Donald M. Campbell, the Chief Executive Officer of H&Q
Guaranty, became a member of our board of directors. Mr. Campbell purchased
$600,000 of securities and H&Q purchased $4,000,000 of securities in the
private placement. In addition, in this private placement, Mr. Patrick E.
Malloy, III, who became a director at our 2000 annual meeting, purchased
$1,500,000 of securities, EIC/GDP Investors, LLC, an affiliate of a significant
holder of our securities, purchased $1,000,000 of securities, Alps Investments,
LLC, a significant holder of our securities, purchased $2,400,000 of securities
and Mr. Michael D. Fulton and Ms. Katheryn E. Cole, significant holders of our
securities, purchased an aggregate of $1,000,000 of securities.
In February 2000, we completed a private placement of 1,500,000 shares of
our common stock, resulting in net proceeds to us of $4,500,000, to the same
investor group that purchased the convertible securities in September 1999. In
this private placement, Mr. Campbell purchased 63,135 shares, Mr. Malloy
purchased 157,839 shares, Entrepreneurial Investment Corporation, an affiliate
of a significant holder of our securities, purchased 105,232 shares, Alps
Investments, LLC purchased 252,543 shares and Mr. Fulton and Ms. Cole purchased
an aggregate 105,231 shares. Also in February 2000, we issued each of Mr.
Malloy and Entrepreneurial Investment Corporation 12,500 shares of our common
stock in consideration of their agreement to underwrite our call for redemption
of the preferred units issued in the September 1999 private placement.
In August 2000, each of H&Q Guaranty, Entrepreneurial Investment Corporation
and Mr. Malloy were paid 15,000 shares of our common stock in consideration of
their agreement to underwrite our call for redemption of the convertible notes
issued in the September 1999 private placement. In addition, we issued 15,000
shares of our common stock to an affiliate of H&Q Guaranty as a fee for
soliciting the investors with respect to the redemption. In connection with the
stand-by underwriting of the redemption, each of H&Q Guaranty, Entrepreneurial
Investment Corporation and Mr. Malloy purchased convertible notes and
subsequently redeemed them for an aggregate of 74,885 shares of common stock.
In October 2000, we completed a private placement of 1,000,000 shares of our
common stock, resulting in net proceeds to us of $5.0 million, to certain
members of the same investor group that purchased our securities in September
1999 and February 2000. We received irrevocable commitments to purchase these
shares on September 28, 2000. H&Q Guaranty acted as placement agent, for which
it received $250,000 in cash.
Mr. Henry Goodrich, Chairman of our board of directors, was a party to a
consulting agreement with us pursuant to which he received compensation of
$150,000 in 1999 and $112,500 through September 2000. Mr. Goodrich's consulting
agreement expired August 15, 2000.
Each of the foregoing transactions with our management and securityholders
was on terms at least as favorable to us as terms we could have obtained from
unaffiliated third parties.
52
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common stock
as of December 31, 2000 by:
. each person known by us to beneficially own 5% or more of our common
stock;
. each of the named executive officers and each of our directors; and
. all of our officers and directors as a group.
Percentage of ownership is based on 13,318,920 shares of common stock
outstanding as of December 31, 2000. Beneficial ownership is calculated based
on SEC requirements. Unless otherwise indicated below, each stockholder named
in the table has sole voting and investment power with respect to all shares
beneficially owned, subject to applicable community property laws.
<TABLE>
<CAPTION>
Beneficial
Ownership
-----------------
Beneficial Owner Amount Percent
---------------- --------- -------
<S> <C> <C>
Five Percent Stockholders+
Daniel H. Case, III(1)................................... 3,755,277 25.2
Hambrecht & Quist Guaranty Finance L.L.C.(1)............. 3,045,098 20.8
Alps Investments, LLC(2)................................. 1,531,798 11.1
Duane Roberts(3)......................................... 1,206,582 9.1
Michael D. Fulton & Katheryn E. Cole(4).................. 850,581 6.4
Named Executive Officers and Directors
Donald M. Campbell(1).................................... 3,547,061 23.8
Patrick E. Malloy, III(5)................................ 1,638,832 12.0
Walter G. Goodrich(6).................................... 1,179,814 8.8
Henry Goodrich(7)........................................ 598,421 4.5
Sheldon Appel(8)......................................... 452,937 3.3
Robert C. Turnham, Jr.(9)................................ 83,287 *
Michael Y. McGovern(10).................................. 77,380 *
Roland L. Frautschi(11).................................. 80,745 *
Arthur A. Seeligson(12).................................. 32,664 *
Jeff Bernhard(13)........................................ 18,901 *
Directors and Executive Officers as a Group (10
persons)(14)............................................ 7,201,023 45.8%
</TABLE>
--------
*Less than 1%.
+Excluding directors and executive officers.
(1) Includes the following securities held by Hambrecht & Quist Guaranty
Finance L.L.C. on its own behalf: (a) 1,720,350 shares of common stock,
(b) 37,107 shares of common stock issuable upon conversion of 89,050
shares of Series A preferred stock, (c) 127,663 shares of common stock
issuable upon conversion of 114,496 shares of Series B preferred stock,
and (d) warrants to purchase 1,159,978 shares of common stock. Mr.
Campbell is Chief Executive Officer of Hambrecht & Quist Guaranty Finance
L.L.C. and may be deemed to exercise shared voting and investment power
with respect to the shares beneficially owned by H&Q Guaranty. Mr. Case is
Chairman and Chief Executive Officer of Hambrecht & Quist California, the
majority parent of H&Q Guaranty, and of Hambrecht & Quist Group, the
parent of H&Q California, and may be deemed to exercise shared voting and
investment power with respect to the shares beneficially owned by H&Q
Guaranty. In addition to the shares owned directly by H&Q Guaranty, the
53
<PAGE>
shares beneficially owned by Mr. Case include the following securities:
(a) 377,582 shares of common stock held by Mr. Case on his own behalf, (b)
83,629 shares of common stock held by Stacey Case, Mr. Case's wife, (c)
16,725 shares of common stock issuable upon conversion of 15,000 shares of
Series B preferred stock held by Mr. Case, (d) 12,265 shares of common
stock issuable upon conversion of 11,000 shares of Series B preferred
stock held by Mrs. Case, (e) warrants to purchase 175,989 shares of common
stock held by Mr. Case, and (f) warrants to purchase 43,989 shares of
common stock held by Mrs. Case. In addition to the shares owned directly
by H&Q Guaranty, the shares beneficially owned by Mr. Campbell include the
following securities: (a) 134,130 shares of common stock held by
Mr. Campbell on his own behalf, (b) 132,019 shares of common stock held by
Mr. Campbell in his retirement account, (c) 2,442 shares of common stock
held by a partnership in which Mr. Campbell has an approximate 60%
interest, (d) 6,042 shares of common stock issuable upon conversion of
14,500 shares of Series A preferred stock held by Mr. Campbell on his own
behalf, (e) 3,584 shares of common stock issuable upon conversion of 8,600
shares of Series A preferred stock held by Mr. Campbell in his retirement
account, (f) 44,254 shares of common stock issuable upon conversion of
39,690 shares of Series B preferred stock held by Mr. Campbell on his own
behalf, (g) 44,600 shares of common stock issuable upon conversion of
40,000 shares of Series B preferred stock held by Mr. Campbell in his
retirement account, (h) 892 shares of common stock issuable upon
conversion of 800 shares of Series B preferred stock held by Mr.
Campbell's wife, (i) warrants to purchase 66,825 shares of common stock,
(j) warrants to purchase 65,175 shares of common stock held by Mr.
Campbell in his retirement account, and (k) options to purchase 2,000
shares of common stock. The address of Hambrecht & Quist Guaranty Finance
L.L.C. and Messrs. Case and Campbell is One Bush Street, San Francisco,
California 94104.
(2) Includes the following securities held by Alps Investments, LLC on its own
behalf: (a) 1,003,798 shares of common stock and (b) warrants to purchase
528,000 shares of common stock. The address of Alps Investments, LLC is
650 Tysons Boulevard, McLean, Virginia 22102.
(3) Includes the following securities: (a) 365,000 shares of common stock held
by Mr. Roberts, (ii) 250,000 shares of common stock held by
Entrepreneurial Capital Corporation, over which Mr. Roberts exercises
shared voting and investment power, (c) 485,882 shares of common stock
held by Entrepreneurial Investment Corporation, over which Mr. Roberts
exercises shared voting and investment power, (d) 44,200 shares of common
stock held by 3R Investments, over which Mr. Roberts exercises shared
voting and investment power, (e) 51,500 shares of common stock held by Mr.
Roberts' wife and (f) 10,000 shares of common stock owned by Mr. Roberts'
children. Mr. Roberts address is 4100 Newport Place, Suite 400, Newport
Beach, California 92660.
(4) Includes the following securities held by Mr. Fulton and Ms. Cole on their
own behalf: (a) 608,270 shares of common stock, (b) warrants to purchase
220,011 shares of common stock, and (c) 22,300 shares of common stock
issuable upon conversion of 20,000 shares of Series B preferred stock. Mr.
Fulton and Ms. Cole's address is 6328 NE 194th Street, Kenmore, Washington
98028.
(5) Includes the following securities held by Mr. Malloy on his own behalf:
(a) 1,294,331 shares of common stock, (b) 12,501 shares of common stock
issuable upon conversion of 30,000 shares of Series A preferred stock, (c)
warrants to purchase 330,000 shares of common stock, and (d) options to
purchase 2,000 shares of common stock. Mr. Malloy's address is Bay Street
at the Waterfront, Sag Harbor, New York 11963.
(6) Includes the following securities held by Walter G. Goodrich on his own
behalf: (a) 269,332 shares of common stock, (b) 1,667 shares of common
stock issuable upon conversion of 4,000 shares of Series A preferred
stock, (c) 47,833 shares of common stock issuable upon the conversion of
42,900 shares of Series B preferred stock and (d) options to purchase
8,333 shares of common stock. In addition, includes (a) 509,019 shares of
common stock held by HGF Partnership, a Louisiana partnership, in which
Walter G. Goodrich owns an indirect general partnership interest, (b)
282,134 shares of common stock owned by Goodrich Energy, Inc., a
corporation with respect to which Walter G. Goodrich is the sole
stockholder, and (c) 61,496 shares of common stock issuable upon
conversion of 55,153 shares of Series B preferred stock held by Goodrich
Energy. Walter G. Goodrich may be deemed to exercise shared voting and
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investment power with respect to the shares held by HGF Partnership. Walter
G. Goodrich exercises sole voting and investment power with respect to the
shares held by Goodrich Energy. Walter G. Goodrich and Henry Goodrich
beneficially own 9.4% of the outstanding shares of common stock. Walter G.
Goodrich's address is 815 Walker Street, Suite 1040, Houston, Texas 77002.
(7) Includes the following securities: (a) 82,069 shares of common stock held
by Henry Goodrich on his own behalf, (b) 509,019 shares of common stock
held by HGF Partnership and (c) options to purchase 7,333 shares of common
stock. Henry Goodrich may be deemed to exercise shared voting and
investment power with respect to the shares held by HGF Partnership. Henry
Goodrich and Walter G. Goodrich beneficially own 9.4% of the outstanding
shares of common stock. Henry Goodrich's address is 333 Texas St., Suite
1375, Shreveport, Louisiana 71101.
(8) Includes the following securities: (a) 110,136 shares of common stock held
by Mr. Appel on his own behalf, (b) 27,925 shares of common stock issuable
upon conversion of 67,015 shares of Series A preferred stock held by Mr.
Appel and (c) options to purchase 9,250 shares of common stock. In
addition, includes 305,626 shares of common stock issuable upon conversion
of 274,104 shares of Series B preferred stock held by a trust of which Mr.
Appel is the trustee. Mr. Appel's address is 2148 Federal Avenue, Suite A,
Los Angeles, California 90025.
(9) Includes the following securities held by Mr. Turnham on his own behalf:
(a) 52,545 shares of common stock, (b) 1,375 shares of common stock
issuable upon the conversion of 3,300 shares of Series A preferred stock
and (c) options to purchase 5,833 shares of common stock. In addition,
includes the following securities held by Mr. Turnham's wife: (a) 21,450
shares of common stock and (b) 2,084 shares of common stock issuable upon
conversion of 5,000 shares of Series A preferred stock.
(10) Includes the following securities: (a) 53,369 shares of common stock held
by Mr. McGovern on his own behalf and (b) warrants to purchase 22,011
shares of common stock held by a partnership in which Mr. McGovern has an
approximate 50% interest. In addition, includes options to purchase 2,000
shares of common stock.
(11) Includes the following securities held by Mr. Frautschi on his own behalf:
(a) 75,412 shares of common stock and (b) options to purchase 5,333 shares
of common stock.
(12) Includes the following securities held by Mr. Seeligson on his own behalf:
(a) 20,601 shares of common stock and (b) options to purchase 12,063
shares of common stock.
(13) Includes the following securities: (a) 8,088 shares of common stock held
by Mr. Benhard on his own behalf, (b) options to purchase 8,313 shares of
common stock and (c) 2,500 shares of common stock held by Mr. Benhard's
wife.
(14) The number of shares of common stock beneficially owned by all executive
officers and directors as a group includes the following securities: (a)
92,285 shares of common stock issuable upon conversion of 221,466 shares
of Series A preferred stock, (b) 632,364 shares of common stock issuable
upon exercise of 567,143 shares of Series B preferred stock, (c) warrants
to purchase 1,621,978 shares of common stock and (d) options to purchase
35,626 shares of common stock.
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DESCRIPTION OF CAPITAL STOCK
General
Our authorized capital stock consists of 25,000,000 shares of common stock,
par value $0.20 per share, and 10,000,000 shares of preferred stock, par value
$1.00 per share, of which 1,375,000 shares are designated as Series A
Convertible Preferred Stock and 750,000 shares are designated as Series B
Convertible Preferred Stock. As of the date of this prospectus, 13,318,920
shares of our common stock, 791,968 shares of our Series A preferred stock and
660,839 shares of our Series B preferred stock were issued and outstanding.
The following summary of the provisions of our capital stock is subject to
and qualified in its entirety by our articles of incorporation and bylaws and
by the provision of applicable law.
Common Stock
Holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Holders of
common stock do not have the right to cumulate their votes in the election of
directors. Holders of common stock are entitled to receive dividends when, as
and if declared by the board of directors out of funds legally available
therefor, subject to any dividend preferences of any outstanding shares of
preferred stock. In the event of our liquidation, dissolution or winding up,
holders of common stock have the right to share ratably in any assets remaining
after the satisfaction in full of all our liabilities and of all liquidation
preferences on any outstanding shares of preferred stock. Holders of common
stock have no preemptive or preferential rights to purchase or subscribe for
any part of any additional securities or rights to convert their common stock
into other securities and are not subject to future calls or assessments by us.
All outstanding shares of common stock are, and all shares of common stock
offered in connection with the offering and to be issued upon conversion of the
preferred stock upon issuance will be, fully paid and nonassessable.
Preferred Stock
Generally. Our board of directors is authorized, without further action by
the stockholders, to issue up to 10,000,000 shares of preferred stock and to
fix and determine the designations, series, powers, preferences, rights,
qualifications, limitations and restrictions of the preferred stock. The rights
of the holders of common stock will be subject to, and may be adversely
affected by, the rights of the holders of preferred stock. The issuance of a
new series of the preferred stock could have the effect of delaying, deferring
or preventing a change of control of Goodrich.
Series A Convertible Preferred Stock. Our certificate of incorporation
authorizes 1,375,000 shares of Series A Convertible Preferred Stock. The Series
A preferred stock ranks senior to the common stock with respect to dividends
and distributions of assets upon our liquidation, dissolution or winding up.
There are 791,968 shares of Series A preferred stock outstanding as of the date
hereof. The Series A preferred stock has a par value of $1.00 per share, with a
liquidation preference of $10.00 per share. It is convertible at the option of
the holder at any time, unless earlier redeemed, into shares of our common
stock at an initial conversion rate of 0.4167 shares of common stock per share
of Series A preferred stock. The Series A preferred stock will automatically
convert into common stock at a rate of 0.4167 shares of common stock for each
share of Series A preferred stock if the closing price for the Series A
preferred stock exceeds $15.00 per share for ten consecutive trading days.
Holders of shares of Series A preferred stock are entitled to receive, when,
as and if declared by our board of directors, out of any funds legally
available for this purpose, cash dividends at the annual rate of 8% or $0.80
per share, accruing without interest and cumulative from the date of first
issuance. These dividends are payable quarterly in arrears on March 31, June
30, September 30 and December 31 of each year. Dividends and distributions
(other than dividends payable solely in junior ranking capital stock) may not
be declared, paid or
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set apart for payment and purchases, redemptions or other acquisitions of
shares of common stock or other junior ranking capital stock unless all accrued
and unpaid dividends on the Series A preferred stock have been paid or declared
and set apart for payment.
We may, at our option, redeem all or part of the shares of Series A
preferred stock then outstanding, subject to the limitations, if any, imposed
by applicable law, at a redemption price of $12.00 per share plus any accrued
and unpaid dividends, whether or not declared. There is no mandatory redemption
or sinking fund obligation with respect to the Series A preferred stock.
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of Goodrich, holders of shares of Series A preferred stock will be
entitled to receive, out of our assets legally available therefor, a sum equal
to $10.00 per share of Series A preferred stock, subject to adjustments for
stock splits or combinations, plus all dividends, if any, accrued and unpaid to
the distribution date.
Holders of shares of Series A preferred stock have no voting rights, except
as required by law, unless dividends payable on the Series A preferred stock
fall into arrears in an amount equal to at least six quarterly dividends,
whether or not consecutive. In such an event, the number of our directors may
be increased by two upon such election by Series A holders, and holders of
shares of Series A preferred stock (voting separately as a class with the
holders of stock ranking on a parity with the Series A preferred stock and with
like voting rights) will be exclusively entitled to elect, at any meeting of
stockholders at which directors are to be elected during the period such
dividends remain in arrears, such two additional directors to serve until all
such dividends have been paid in full or set apart for payment.
So long as any shares of Series A preferred stock are outstanding, we may
not, without the affirmative vote of the holders of at least 66 2/3% of all
outstanding shares of Series A preferred stock, voting separately as a class,
do the following:
. amend, alter or repeal any provision of our Certificate of Incorporation
or Bylaws to adversely affect the rights of the Series A preferred
stock;
. authorize or issue or increase the authorized amount of any additional
class or series of stock ranking senior to the Series A preferred stock;
or
. effect any reclassification of the Series A preferred stock.
So long as any shares of Series A preferred stock are outstanding, we may
not, without the affirmative vote of the holders of at least 50% of all
outstanding shares of Series A preferred stock, voting separately as a class,
do the following:
. authorize or issue or increase the authorized amount of any additional
class or series of stock having dividend or liquidation rights on a
parity with the Series A preferred stock and having the right to vote on
matters as to which the Series A preferred stock is not entitled to
vote; or
. incur indebtedness for money borrowed or authorize or issue stock
ranking on a parity with such Series A preferred stock as to dividends
or liquidation if adjusted stockholders' equity is less than the
liquidation preference of the Series A preferred stock and all stock
ranking senior to or on a parity with the Series A preferred stock.
Upon the occurrence of the first "Ownership Change" with respect to our
company, holders of Series A preferred stock have the right, at the holder's
option, for a period of 45 days following notice of such change to convert all,
but not less than all, of such holder's Series A preferred stock into common
stock with an aggregate Market Value equal to the aggregate Adjusted Value of
the Series A preferred stock for which conversion is elected. In September
1999, such an Ownership Change occurred when H&Q Guaranty and its affiliates
became the beneficial owner of more than 30% of our voting stock. Under the
terms of our Series A preferred stock, we were required to send notice of such
occurrence within 30 days of such event setting forth the details regarding the
special conversion right. The board has determined that it is in the best
interests of the
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company to send such notice, and to offer such conversion right, to the current
holders of Series A preferred stock, granting such holders a 45-day period
after the mailing of the notice in which to elect such conversion at the rate
of 0.7813 shares of common stock for each share of Series A preferred stock.
Two of the holders of our Series A preferred stock elected to participate in
the special conversion. There are currently 16 record holders of our Series A
preferred stock.
If a Corporate Change (as defined below) should occur with respect to us,
each holder of Series A preferred stock shall have the right, at the holder's
option, for a period of 45 days after the mailing of a notice by us that a
Corporate Change has occurred, to convert all, but not less than all, of such
holder's Series A preferred stock into Marketable Stock (as defined below) with
an aggregate Market Value (as defined below) equal to the Adjusted Value (as
defined below) of the Series A preferred stock. If following a Corporate Change
no Marketable Stock is outstanding, each holder of Series A preferred stock
will have a special conversion right, if he so elects, to receive an amount of
securities, cash or other property distributed to holders of common stock in
the Corporate Change. The value of such amount will equal the Adjusted Value
per share of the Series A preferred stock. We or our successor, as the case may
be, may, at our/their option, in lieu of providing Marketable Stock, provide
the holder with cash equal to the Adjusted Value of the shares of Series A
preferred stock. If the Series A preferred stock becomes subject to this
special conversion right due to a Corporate Change, the Series A preferred
stock remains convertible into the kind and amount of securities, cash or other
assets that the holders would have owned immediately after the Corporate Change
if the holders had converted the Series A preferred stock immediately before
the effective date of the Corporate Change.
At least 30 days prior to the proposed effective date of a Corporate Change,
we will mail to each holder of Series A preferred stock a notice setting forth
the details of the proposed Corporate Change and the special conversion right.
Within 30 days of the occurrence of a Corporate Change with respect to us, we
will mail to each registered holder of Series A preferred stock a notice of
such occurrence setting forth details regarding the special conversion right of
such Corporate Change. A holder of Series A preferred stock must exercise the
special conversion right within the 45-day period after the mailing of such
notice of occurrence by us or such special conversion right shall expire.
Exercise of such conversion right shall be irrevocable, and dividends on Series
A preferred stock tendered for special conversion shall cease to accrue from
and after the conversion date.
As used herein, a "Corporate Change" with respect to us means:
. the occurrence of any transaction or event in connection with which all
or substantially all of our common stock is exchanged for, converted
into, acquired for or constitutes solely the right to receive cash,
securities, property or other assets; or
. the conveyance, sale, lease, assignment, transfer or other disposal of
all or substantially all of our property, business or assets.
As used herein, the "Adjusted Value" of a share of Series A preferred stock
is an amount equal to the Stated Value; provided, however, that if the
Reference Value of a share of common stock exceeds both the Market Value of a
share of common stock and the Applicable Value, then the Adjusted Value shall
be determined by multiplying the greater of the Market Value of a share of
common stock or the Applicable Value by the quotient of the Stated Value of a
share of Series A preferred stock divided by the Reference Value per share of
common stock.
As used herein, the "Applicable Value" shall be an amount equal to the sum
of the cash, Market Value of Marketable Stock and the value of any other
securities, property or other consideration distributed to holders of common
stock for each share of common stock upon or in connection with a Corporate
Change.
As used herein, "Market Value" of the common stock, or of the common stock
of the corporation that is the successor to all or substantially all of our
business and assets as a result of a Corporate Change, shall be the average of
the closing market price of such common stock or other common stock, as the
case may be, for the five business days ending on the last business day
preceding the date of the Ownership Change or Corporate Change.
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As used herein, the term "Marketable Stock" shall mean our common stock or
the common stock of our successor as a result of a Corporate Change, which in
either case is listed on the NYSE or the American Stock Exchange or approved
for quotation in the Nasdaq National Market or any similar system of automated
dissemination of quotations of securities prices in the United States.
As used herein, "Stated Value" of a share of Series A preferred stock
converted during the 45-day period following the occurrence of a Corporate
Change or an Ownership Change shall mean the price per share we would be
required to pay if we exercised our option to redeem such shares on the
conversion date, plus an amount equal to the amount by which the Market Value
of the common stock exceeds the exercise price of the Warrant.
As used herein, the term "Reference Value" shall initially mean $1.92 per
share; provided, however, that in the event of any adjustment to the conversion
price, the Reference Value shall also be adjusted so that the ratio of the
Reference Value to the conversion price, after giving effect to any such
adjustment, shall always be the same as the ratio of $1.92 to the initial
conversion price.
Series B Convertible Preferred Stock. Our Certificate of Incorporation
authorizes 750,000 shares of Series B Convertible preferred stock. The shares
of the Series B preferred stock constitute a single series of our preferred
stock. The holders of the Series B preferred stock have no preemptive rights
with respect to any shares of our capital stock or any of our other securities.
The Series B preferred stock is not subject to any sinking fund or other
obligation of Goodrich to redeem or retire the Series B preferred stock. The
Series B preferred stock has not been approved for listing on any stock
exchange.
Anti-Takeover Provisions of Our Certificate of Incorporation and Bylaws
Classified board of directors and Limitations on Removal of Directors
Our board of directors is divided into three classes. The directors of each
class are elected for three-year terms, with the terms of the three classes
staggered so that directors from a single class are elected at each annual
meeting of stockholders.
Written Consent of Stockholders
Our certificate of incorporation provides that any action required or
permitted to be taken by our stockholders may be taken at a duly called meeting
of stockholders or by written consent of stockholders owning the minimum number
of shares required to approve such action. Any action by our stockholders must
be taken at an annual or special meeting of stockholders. Special meetings of
the stockholders may be called at any time by the Chairman of the Board, the
President, by a majority of the board of directors, on the written request of
any two directors, or by the Secretary. A special meeting must be called by the
Chairman of the Board, the President or the Secretary when a written request is
delivered to such officer, signed by the holders of at least 10% of the issued
and outstanding stock entitled to vote at such meeting.
Advance Notice Procedure for Stockholder Proposals
Our bylaws establish an advance notice procedure for the nomination of
candidates for election as directors, as well as for stockholder proposals to
be considered at annual meetings of stockholders. In general, notice of intent
to nominate a director must be delivered to or mailed and received at our
principal executive offices as follows:
. with respect to an election to be held at the annual meeting of
stockholders, 90 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders;
. with respect to an election to be held at a special meeting of
stockholders for the election of directors, not later than the close of
business on the 10th day following the day on which such notice of the
date of the meeting was mailed to stockholders or public disclosure of
the date of the meeting was made, whichever first occurs, and must
contain specified information concerning the person to be nominated.
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Notice of stockholders' intent to raise business at an annual meeting must
be delivered to or mailed and received at our principal executive offices not
less than 90 days prior to the anniversary date of the preceding annual meeting
of stockholders. These procedures may operate to limit the ability of
stockholders to bring business before a stockholders' meeting, including with
respect to the nomination of directors or considering any transaction that
could result in a change in control. These advance notice procedures are not
applicable prior to the trigger date.
Limitation of Liability of Officers and Directors
Our certificate of incorporation provides that no director shall be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability as follows:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law;
. for unlawful payment of a dividend or unlawful stock purchase or stock
redemption (Section 174 of the Delaware General Corporation Law); and
. for any transaction from which the director derived an improper personal
benefit.
The effect of these provisions is to eliminate the rights of Goodrich and
our stockholders, through stockholders' derivative suits on behalf of Goodrich,
to recover monetary damages against a director for breach of fiduciary duty as
a director, including breaches resulting from grossly negligent behavior,
except in the situations described above.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is ComputerShare, and
its address is 311 West Monroe Street, Chicago, Illinois 60606 and telephone
number is (312) 588-4700.
Registration Rights
In connection with our private placements of securities in September 1999
and February 2000 we entered into a registration rights agreement for the
benefit of the holders of those securities. The registration rights agreement
provides that holders of more than $500,000 of registrable securities or
holders of at least 50% of those securities can request that we register their
shares for resale by filing a shelf registration statement on their behalf. We
have the right to delay any such request for registration for six months
following the effectiveness of the registration statement of which this
prospectus is a part.
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PLAN OF DISTRIBUTION
The shares of common stock being offered hereby will be sold by us directly
to the public. In addition, Jefferies & Company, Inc., Southwest Securities,
Inc., Morgan Keegan & Company, Inc. and J.P. Morgan H&Q may assist us as agents
in the placement of shares of common stock. None of these firms has any
obligation to offer or purchase shares of common stock and it is not expected
that any agent will purchase shares for resale. In the event that any such firm
places shares as an agent for Goodrich, Goodrich will pay such firm a
commission of up to $ per share. Our agents will assume responsibility for
their own expenses in connection with such placement activities. Any such agent
may be deemed to be an underwriter, as that term is defined in the Securities
Act of 1933, of the shares of common stock so offered and sold. We will
indemnify such agents against certain liabilities under the Securities Act of
1933 and agree to contribute to payments such agents may be required to make in
respect thereof.
In connection with our recent $5.0 million private placement completed in
October 2000, we paid Jefferies & Company, Inc. an advisory fee in the amount
of $100,000 for financial advisory and structuring services. We have further
agreed to reimburse Jefferies & Company, Inc. for a portion of its direct, out-
of-pocket expenses in connection with a proposed underwritten public offering
in December 2000 which was not completed.
We have paid fees and other compensation to affiliates of H&Q Guaranty in
connection with several recent private placements and such affiliates are
significant holders of our common stock. See "Transactions with our Management
and Securityholders" and "Principal Stockholders" for a description of such
transactions and ownership.
No agent of the Company intends to engage in stabilizing transactions or
similar market making activity in connection with the direct offering of shares
by Goodrich.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by
Vinson & Elkins L.L.P., Houston, Texas.
INDEPENDENT ACCOUNTANTS
The financial statements of Goodrich Petroleum Corporation and subsidiaries
as of December 31, 1999 and 1998, and for each of the years in the three-year
period ended December 31, 1999, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
INDEPENDENT PETROLEUM ENGINEERS
Information relating to the estimated proved reserves of oil and natural gas
and the related statements of future cash flows and present values of future
net revenues thereof and other related calculations as of January 1, 2000 and
June 30, 2000 included herein and in the notes to our financial statements have
been prepared by Coutret & Associates, Inc., independent petroleum engineers.
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WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-1 that we have
filed with the SEC under the Securities Act with respect to the common stock
offered in this prospectus. This prospectus does not contain all of the
information that is in the registration statement. Certain parts of the
registration statement are omitted as allowed by the rules and regulations of
the SEC. We refer you to the registration statement for further information
about our company and the securities offered in this prospectus.
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Those reports, proxy
statements and other information, as well as the registration statement of
which this prospectus forms a part, can be inspected and copied at the Public
Reference Room maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, DC 20549. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding us, as well as the registration statement of which
this prospectus forms a part. The reports, proxy and information statements and
other information concerning us also can be inspected and copied at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York
10005, on which our common stock is listed.
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GLOSSARY OF TECHNICAL TERMS
The definitions below apply to the technical terms used in this prospectus.
All volumes of natural gas referred to herein are stated at the legal pressure
base of the state or area where the reserves exist and at 60 degrees Fahrenheit
and in most instances are rounded to the nearest major multiple.
After payout. With respect to an oil or gas interest in a property, refers
to the time period after which the costs to drill and equip a well have been
recovered.
Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in
reference to crude oil or other liquid hydrocarbons.
Bcf. Billion cubic feet.
Bcfe. Billion cubic feet equivalent, determined using the ratio of six Mcf
of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
Boe. Barrels of oil equivalent, determined using the ratio of six Mcf of
natural gas to one Bbl of crude oil, condensate or natural gas liquids.
Btu or British Thermal Unit. The quantity of heat required to raise the
temperature of one pound of water by one degree Fahrenheit.
Completion. The installation of permanent equipment for the production of
oil or gas or, in the case of a dry hole, the reporting of abandonment to the
appropriate agency.
Developed acreage. The number of acres which are allocated or assignable to
producing wells or wells capable of production.
Development well. A well drilled within the proved area of an oil or gas
reservoir to the depth of a stratigraphic horizon believed to be productive.
Dry hole. A well found to be incapable of producing hydrocarbons in
sufficient quantities such that proceeds from the sale of such production
exceed production expenses and taxes.
Exploratory well. A well drilled to find and produce oil or gas reserves not
classified as proved, to find a new reservoir in a field previously found to be
productive of oil or gas in another reservoir or to extend a known reservoir.
Farm-in or farm-out. An agreement whereunder the owner of a working interest
in an oil and natural gas lease assigns the working interest or a portion
thereof to another party who desires to drill on the leased acreage. Generally,
the assignee is required to drill one or more wells in order to earn its
interest in the acreage. The assignor usually retains a royalty or reversionary
interest in the lease. The interest received by an assignee is a "farm-in"
while the interest transferred by the assignor is a "farm-out."
Field. An area consisting of a single reservoir or multiple reservoirs all
grouped on or related to the same individual geological structural feature
and/or stratigraphic condition.
Finding costs. Costs associated with acquiring exploring for and developing
proved oil and natural gas reserves, including all costs involved in acquiring
acreage, geological and geophysical work and the cost of drilling and
completing wells.
Gross acres or gross wells. The total acres or wells, as the case may be, in
which a working interest is owned.
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MBbls. One thousand barrels of crude oil or other liquid hydrocarbons.
Mcf. One thousand cubic feet.
Mcfe. One thousand cubic feet equivalent, determined using the ratio of six
Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
MMBbls. One million barrels of crude oil or other liquid hydrocarbons.
MMBtu. One million British Thermal Units.
MMcf. One million cubic feet.
MMcf/d. One million cubic feet per day.
MMcfe. One million cubic feet equivalent, determined using the ratio of six
Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
Net acres or net wells. The sum of the fractional working interests owned
in gross acres or gross wells.
Normally pressured reservoirs. Reservoirs with a formation-fluid pressure
equivalent to 0.465 psi per foot of depth from the surface. For example, if
the formation pressure is 4,650 psi at 10,000 feet, then the pressure is
considered to be normal.
Over-pressured reservoirs. Reservoirs subject to abnormally high pressure
as a result of certain types of subsurface formations.
Present value. When used with respect to oil and natural gas reserves, the
estimated future gross revenue to be generated from the production of proved
reserves, net of estimated production and future development costs, using
prices and costs in effect as of the date indicated, without giving effect to
nonproperty-related expenses such as general and administrative expenses, debt
service and future income tax expense or to depreciation, depletion and
amortization, discounted using an annual discount rate of 10%.
Productive well. A well that is found to be capable of producing
hydrocarbons in sufficient quantities such that proceeds from the sale of such
production exceed production expenses and taxes.
Proved developed non-producing reserves. Proved developed reserves expected
to be recovered from zones behind casing in existing wells.
Proved developed producing reserves. Proved developed reserves that are
expected to be recovered from completion intervals currently open in existing
wells and able to produce to market.
Proved developed reserves. Proved reserves that can be expected to be
recovered from existing wells with existing equipment and operating methods.
Proved reserves. The estimated quantities of crude oil, natural gas and
natural gas liquids that geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
Proved undeveloped location. A site on which a development well can be
drilled consistent with spacing rules for purposes of recovering proved
undeveloped reserves.
Proved undeveloped reserves. Proved reserves that are expected to be
recovered from new wells on undrilled acreage or from existing wells where a
relatively major expenditure is required for recompletion.
64
<PAGE>
PV-10 Value. The present value of estimated future revenues to be generated
from the production of proved reserves, calculated in accordance with
Commission guidelines, net of estimated production and future development
costs, using prices and costs as of the date of estimation without future
escalation, without giving effect to non-property related expenses such as
general and administrative expenses, debt service, future income tax expense
and depreciation, depletion and amortization, and discounted using an annual
discount rate of 10%.
Recompletion. The completion for production of an existing well bore in
another formation from that in which the well has been previously completed.
Reservoir. A porous and permeable underground formation containing a natural
accumulation of producible oil and/or gas that is confined by impermeable rock
or water barriers and is individual and separate from other reservoirs.
Royalty interest. An interest in an oil and natural gas property entitling
the owner to a share of oil or gas production free of costs of production.
Standardized Measure. The present value, discounted at 10%, of future net
cash flows from estimated proved reserves after income taxes calculated holding
prices and costs constant at amounts in effect on the date of the report
(unless such prices or costs are subject to change pursuant to contractual
provisions) and otherwise in accordance with the SEC's rules for inclusion of
oil and gas reserve information in financial statements filed with the SEC.
3-D seismic data. Three-dimensional pictures of the subsurface created by
collecting and measuring the intensity and timing of sound waves transmitted
into the earth as they reflect back to the surface.
Undeveloped acreage. Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and natural gas regardless of whether such acreage contains proved
reserves.
Working interest. The operating interest that gives the owner the right to
drill, produce and conduct operating activities on the property and a share of
production.
Workover. Operations on a producing well to restore or increase production.
65
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Balance Sheets at September 30, 2000 (Unaudited) and
December 31, 1999....................................................... F-2
Consolidated Statements of Operations (Unaudited) Nine Months Ended
September 30, 2000 and 1999............................................. F-3
Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended
September 30, 2000 and 1999............................................. F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Income
(Unaudited) Nine Months Ended September 30, 2000 and 1999............... F-5
Notes to Consolidated Financial Statements September 30, 2000 and 1999
(Unaudited)............................................................. F-6
Independent Auditors' Report............................................. F-9
Consolidated Balance Sheets at December 31, 1999 and 1998................ F-10
Consolidated Statements of Operations Years Ended December 31, 1999, 1998
and 1997................................................................ F-11
Consolidated Statements of Cash Flows Years Ended December 31, 1999, 1998
and 1997................................................................ F-12
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Year Ended December 31, 1999, 1998 and 1997............................. F-13
Notes to Consolidated Financial Statements December 31, 1999............. F-14
</TABLE>
F-1
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
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
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
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 outstanding 796,318
shares (liquidation preference $10 per share).... 796,318 796,318
Series B convertible preferred stock, par value
$1.00 per share; issued and outstanding 660,839
and 665,759 shares, respectively (liquidation
preference $10 per share)........................ 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.
F-2
<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.
F-3
<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 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 dividends of 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)
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 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 of 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.
F-4
<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>
Accumulated Other
Series A* Series B* Comprehensive
Preferred Stock Preferred Stock Common Stock Loss Unrealized
------------------ ------------------ --------------------- Additional Gain (Loss) on
Number Par Number Par Number Paid-In Accumulated Marketable
of Shares Value of Shares Value of Shares Par Value Capital Deficit Equity Securities
--------- -------- --------- -------- ---------- ---------- ----------- ------------ -----------------
<S> <C> <C> <C> <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 $15,226,027 $(12,461,598) $(400,900)
Net loss........ -- -- -- -- -- -- -- (1,612,265) --
Realized loss on
sale of
marketable
securities...... -- -- -- -- -- -- -- -- 400,900
Total
Comprehensive
Income (Loss)... -- -- -- -- -- -- -- -- --
Directors stock
grant........... -- -- -- -- 30,000 6,000 24,000 -- --
------- -------- ------- -------- ---------- ---------- ----------- ------------ ---------
Balance at
September 30,
1999............ 796,318 $796,318 750,000 $750,000 5,277,705 $1,055,541 $15,250,027 $(14,073,863) --
======= ======== ======= ======== ========== ========== =========== ============ =========
Balance at
December 31,
1999............ 796,318 $796,318 665,759 $665,759 5,417,171 $1,083,434 $18,156,114 $(14,290,581) --
Net Income...... -- -- -- -- -- -- -- 5,241,909 --
Total
Comprehensive
Income ......... -- -- -- -- -- -- -- -- --
Issuance of
common stock.... -- -- -- -- 1,533,333 306,667 4,193,333 -- --
Conversion of
preferred stock
of subsidiary to
common stock.... -- -- -- -- 1,547,665 309,533 2,411,956 -- --
Exercise of
director stock
option.......... -- -- -- -- 12,500 2,500 7,375 -- --
Conversion of
notes payable... -- -- -- -- 3,295,647 659,130 9,751,719 -- --
Preferred stock
dividends....... -- -- -- -- -- -- -- (2,068,652) --
Exercise of
common stock
purchase
warrants........ -- -- -- -- 252,022 50,403 198,919 -- --
Exercise of
employee stock
option.......... -- -- -- -- 245,698 49,140 142,304 -- --
Director stock
grant........... -- -- -- -- 6,000 1,200 28,800 -- --
Conversion of
Series B
preferred stock
to common
stock........... -- -- (4,920) (4,920) 5,486 1,097 3,823 -- --
------- -------- ------- -------- ---------- ---------- ----------- ------------ ---------
Balance at
September 30,
2000............ 796,318 $796,318 660,839 $660,839 12,315,522 $2,463,104 $34,894,343 $(11,117,324) --
======= ======== ======= ======== ========== ========== =========== ============ =========
<CAPTION>
Total
Stockholders'
Equity
-------------
<S> <C>
Balance at
December 31,
1998............ $ 4,959,388
Net loss........ (1,612,265)
Realized loss on
sale of
marketable
securities...... 400,900
-------------
Total
Comprehensive
Income (Loss)... (1,211,365)
Directors stock
grant........... 30,000
-------------
Balance at
September 30,
1999............ $ 3,778,023
=============
Balance at
December 31,
1999............ $ 6,411,044
Net Income...... 5,241,909
-------------
Total
Comprehensive
Income ......... 5,241,909
Issuance of
common stock.... 4,500,000
Conversion of
preferred stock
of subsidiary to
common stock.... 2,721,489
Exercise of
director stock
option.......... 9,875
Conversion of
notes payable... 10,410,849
Preferred stock
dividends....... (2,068,652)
Exercise of
common stock
purchase
warrants........ 249,322
Exercise of
employee stock
option.......... 191,444
Director stock
grant........... 30,000
Conversion of
Series B
preferred stock
to common
stock........... --
-------------
Balance at
September 30,
2000............ $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.
F-5
<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
registration statement 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
months ended September 30, 2000 and 1999.
The results of operations for the nine month period ended September 30, 2000
are not necessarily indicative of the results to be expected for the full year.
NOTE B--Conversion of Convertible Notes
In August 2000, the holders of approximately $12,943,000 of principal 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 stand-by underwriting to finance the purchase of the
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 of directors. 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.
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 a 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
F-6
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
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 survey 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 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 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
Preferred Units, representing one hundred percent of the 300,000 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 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 nine months ended September 30,
2000 and 1999. The following table reconciles the weighted-average shares
outstanding used for these computations.
<TABLE>
<CAPTION>
Reconciliation of
Shares Outstanding
--------------------
Nine Months Ended
September 30,
--------------------
2000 1999
---------- ---------
<S> <C> <C>
Basic Method............................................... 8,873,159 5,262,320
Dilutive Stock Warrants.................................... 2,757,535 --
Dilutive Stock Options..................................... 653,787 --
Convertible Debt........................................... 2,766,419 --
---------- ---------
Diluted Method............................................. 15,050,900 5,262,320
========== =========
</TABLE>
Net income applicable to common stock has been adjusted by interest expense
associated with the convertible notes of $877,785 net of related tax expense,
for purposes of calculating diluted earnings per share for the nine months
ended September 30, 2000.
The computations of earnings per share in the consolidated statements of
operations did not consider outstanding convertible preferred stock convertible
into 1,068,661 shares of common stock for the nine months ended September 30,
2000 because the effects of these convertible securities would have improved
the Company's earnings per share.
F-7
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
During 1999 cash dividend payments on its Series A and Series B convertible
preferred stock were suspended. Dividends in arrears amounted to $942,000 for
the nine 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.
NOTE H--Income Taxes
The Company recorded a net deferred tax asset of approximately $1.6 million
in the nine 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 assets, net of valuation
allowance provided will be realized.
No provision for income taxes has been recorded by the Company for the nine
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 Event
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.
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. The exchange will result in the issuance of
1,189,510 shares of the Company's common stock.
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Goodrich Petroleum Corporation:
We have audited the accompanying consolidated balance sheets of Goodrich
Petroleum Corporation and Subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity and
comprehensive income and cash flows for each of the years in the three year
period ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Goodrich
Petroleum Corporation and Subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the years in
the three year period ended December 31, 1999, in conformity with generally
accepted accounting principles.
KPMG LLP
Shreveport, Louisiana
March 29, 2000
F-9
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................... $ 5,929,229 $ 95,630
Marketable equity securities....................... -- 358,700
Accounts receivable
Trade and other, net of allowance................ 669,741 2,197,179
Accrued oil and gas revenue...................... 1,937,711 1,089,226
Prepaid insurance.................................. 53,806 184,898
----------- -----------
Total current assets............................. 8,590,487 3,925,633
----------- -----------
PROPERTY AND EQUIPMENT
Oil and gas properties............................. 65,401,168 53,320,832
Furniture, fixtures and equipment.................. 213,524 195,279
----------- -----------
65,614,692 53,516,111
Less accumulated depletion, depreciation and
amortization...................................... (19,566,835) (13,720,009)
----------- -----------
Net property and equipment....................... 46,047,857 39,796,102
----------- -----------
OTHER ASSETS......................................... 1,620,208 314,853
----------- -----------
TOTAL ASSETS..................................... $56,258,552 $44,036,588
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long term debt.................. $ 3,600,000 $29,500,000
Accounts payable................................... 2,711,746 7,763,507
Accrued liabilities................................ 1,326,995 1,813,693
Current portion other noncurrent liabilities....... 1,182,306 --
----------- -----------
Total current liabilities........................ 8,821,047 39,077,200
----------- -----------
LONG TERM DEBT....................................... 33,353,117 --
OTHER NONCURRENT LIABILITIES
Production payment payable......................... 1,630,784 --
Accrued abandonment costs.......................... 3,108,281 --
Accrued interest on long term debt................. 251,154 --
----------- -----------
Total liabilities................................ 47,164,383 39,077,200
----------- -----------
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 per share; issued and outstanding 796,318
shares (liquidating preference $10 per share,
aggregating to $7,963,180)...................... 796,318 796,318
Series B convertible preferred stock, par value
$1 per share; issued and outstanding 665,759 and
750,000 shares (liquidation preference $10 per
share, aggregating to $6,657,590)............... 665,759 750,000
Common stock, par value $0.20 per share; authorized
25,000,000 shares; issued and outstanding
5,417,171 and 5,247,703 shares.................... 1,083,434 1,049,541
Additional paid-in capital......................... 18,156,114 15,226,027
Accumulated deficit................................ (14,290,581) (12,461,598)
Accumulated other comprehensive income............. -- (400,900)
----------- -----------
Total stockholders' equity....................... 6,411,044 4,959,388
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $56,258,552 $44,036,588
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Oil and gas sales..................... $13,734,691 $ 9,836,863 $11,351,586
Pipeline joint venture................ -- -- 1,078,397
Other................................. 285,883 755,010 471,378
----------- ----------- -----------
Total revenues...................... 14,020,574 10,591,873 12,901,361
----------- ----------- -----------
COSTS AND EXPENSES
Lease operating expense and production
taxes................................ 3,591,427 2,821,515 2,316,006
Depletion, depreciation and
amortization......................... 4,743,608 4,094,447 4,862,754
Exploration........................... 1,656,158 6,010,425 3,205,730
Impairment of oil and gas properties.. 465,465 1,075,853 549,792
Interest expense...................... 2,810,576 1,909,849 1,416,675
General and administrative............ 1,989,703 2,399,332 2,627,672
Preferred dividend requirements of
subsidiary........................... 73,125 -- --
----------- ----------- -----------
Total costs and expenses............ 15,330,062 18,311,421 14,978,629
----------- ----------- -----------
GAIN (LOSS) ON SALES OF ASSETS.......... (519,495) 4,206 688,304
----------- ----------- -----------
LOSS BEFORE INCOME TAXES................ (1,828,983) (7,715,342) (1,388,964)
Income Taxes.......................... -- -- --
----------- ----------- -----------
NET LOSS................................ (1,828,983) (7,715,342) (1,388,964)
Preferred stock dividends (1999
amounts in arrears).................. 1,249,343 1,255,638 1,205,210
----------- ----------- -----------
LOSS APPLICABLE TO COMMON STOCK......... $(3,078,326) $(8,970,980) $(2,594,174)
=========== =========== ===========
BASIC LOSS PER AVERAGE COMMON SHARE..... $ (.58) $ (1.71) $ (.50)
=========== =========== ===========
DILUTED LOSS PER AVERAGE COMMON SHARE... $ (.58) $ (1.71) $ (.50)
=========== =========== ===========
AVERAGE COMMON SHARES OUTSTANDING....... 5,288,011 5,243,105 5,229,307
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................... $(1,828,983) $(7,715,342) $(1,388,964)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depletion, depreciation and
amortization......................... 4,743,607 4,094,447 4,862,754
Amortization of leasehold costs....... 1,103,219 1,016,649 288,037
Amortization of deferred debt
financing costs...................... 109,088 -- 27,694
(Gain) Loss on sale of assets......... 519,495 (4,206) (688,304)
Capital expenditures charged to
income............................... 119,800 4,382,514 2,341,954
Impairment of oil and gas properties.. 465,465 1,075,853 549,792
Accrued interest on private placement
borrowings........................... 251,154 -- --
Amortization of detachable stock
purchase warrants.................... 142,500 -- --
Preferred stock dividends of
subsidiary........................... 73,125 -- --
Payment of other liabilities.......... -- (107,625) (321,040)
Director stock grant.................. 30,000 -- --
Other................................. (68,636) (160,518) (87,357)
Net change in (exclusive of
acquisition):
Accounts receivable................... 678,953 (289,660) 520,391
Prepaid insurance and other........... 195,975 (71,550) 73,933
Accounts payable...................... (5,051,761) 2,975,821 (157,334)
Accrued liabilities................... (418,092) (679,620) 611,069
----------- ----------- -----------
Net cash provided by operating
activities.......................... 1,064,909 4,516,763 6,632,625
----------- ----------- -----------
INVESTING ACTIVITIES
Proceeds from sale of pipeline joint
venture............................... -- -- 3,564,000
Proceeds from sales of assets.......... 249,487 49,091 370,000
Acquisition of oil and gas properties.. (4,099,956) (129,325) (2,074,866)
Capital expenditures................... (2,556,901) (14,878,619) (7,866,173)
----------- ----------- -----------
Net cash used in investing
activities.......................... (6,407,370) (14,958,853) (6,007,039)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from bank borrowings.......... -- 11,500,000 12,000,000
Principal payments of bank borrowings.. (2,409,383) (500,000) (10,963,919)
Proceeds from Private Placement
borrowings............................ 12,000,000 -- --
Proceeds from preferred stock issue.... 3,000,000 -- --
Preferred stock dividends.............. -- (1,255,638) (1,205,210)
Production payments.................... (114,970) -- --
Retirement of preferred stock.......... -- -- (7,650)
Payment of debt financing costs........ (1,303,496) -- --
Exercise of employee stock options..... 3,909 -- --
----------- ----------- -----------
Net cash provided by (used in)
financing activities................ 11,176,060 9,744,362 (176,779)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 5,833,599 (697,728) 448,807
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD.............................. 95,630 793,358 344,551
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................. $ 5,929,229 $ 95,630 $ 793,358
=========== =========== ===========
NON CASH INVESTING ACTIVITIES
Costs of private placement............. 355,800 -- --
Acquisition of oil and gas properties
and assumption of related
liabilities........................... 6,036,342 -- --
Accrued Capital Expenditures and
Financing Costs....................... -- 1,981,276 1,290,658
</TABLE>
See notes to consolidated financial statements.
F-12
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Accumulated Other
Series A Series B Comprehensive
Preferred Stock* Preferred Stock* Common Stock Income-Unrealized
------------------ ------------------ -------------------- Additional Gain (Loss) on
Number Par Number Par Number Paid-In Accumulated Marketable
of Shares Value of Shares Value of Shares Par Value Capital Deficit Equity Securities
--------- -------- --------- -------- --------- ---------- ----------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January
1, 1997........... 801,149 $801,149 -- $ -- 5,225,564 $1,045,113 $ 8,375,282 $ (896,444) $(189,900)
Net loss.......... -- -- -- -- -- -- -- (1,388,964) --
Unrealized Change
in Marketable
Securities........ -- -- -- -- -- -- -- -- 274,300
Total
Comprehensive
Income (Loss).....
Issuance of Series
B Preferred
Stock............. -- -- 750,000 750,000 -- -- 6,750,000 -- --
Preferred stock
dividends
Series A ($.80
per share)...... -- -- -- -- -- -- -- (638,023) --
Series B ($.76
per share)...... -- -- -- -- -- -- -- (567,187) --
Conversion of
preferred stock to
Common Stock...... (3,831) (3,831) -- -- 2,993 599 3,232 -- --
Employee Stock
grants............ -- -- -- -- 3,846 769 24,231 -- --
Retirement of
Series A Preferred
Stock............. (1,000) (1,000) -- -- -- -- (6,650) -- --
------- -------- ------- -------- --------- ---------- ----------- ------------ ---------
Balance at
December 31,
1997.............. 796,318 796,318 750,000 750,000 5,232,403 1,046,481 15,146,095 (3, 490,618) 84,400
------- -------- ------- -------- --------- ---------- ----------- ------------ ---------
Net loss.......... -- -- -- -- -- -- -- (7,715,342) --
Unrealized Change
in Marketable
Securities........ -- -- -- -- -- -- -- (485,300)
Total
Comprehensive
Income (Loss)..... -- -- -- -- -- -- -- -- --
Preferred stock
dividends......... -- -- -- -- -- -- -- (1,255,638) --
Employee and
director stock
grants............ -- -- -- -- 15,302 3,060 79,932 -- --
------- -------- ------- -------- --------- ---------- ----------- ------------ ---------
Balance at
December 31,
1998.............. 796,318 796,318 750,000 750,000 5,247,705 1,049,541 15,226,027 (12,461,598) (400,900)
------- -------- ------- -------- --------- ---------- ----------- ------------ ---------
Net loss.......... -- -- -- -- -- -- -- (1,828,983) --
Realized loss on
sale of marketable
Securities........ -- -- -- -- -- -- -- -- 400,900
Total
Comprehensive
Income (Loss)..... -- -- -- -- -- -- -- -- --
Issuance of Common
Stock Purchase
Warrants with
Preferred Stock... -- -- -- -- -- -- 210,000 -- --
Issuance of Common
Stock Purchase
Warrants for
services.......... -- -- -- -- 40,000 8,000 113,800 -- --
Issuance of Common
Stock Purchase
Warrants as
transaction fee... -- -- -- -- -- -- 234,000 -- --
Issuance of Common
Stock Purchase
Warrants with
debt.............. -- -- -- -- -- -- 2,280,000 -- --
Director Stock
Grants............ -- -- -- -- 30,000 6,000 24,000 -- --
Exercise of
Employee Stock
Options........... -- -- -- -- 5,250 1,050 2,889 -- --
Conversion of
Series B Preferred
Stock to Common
Stock............. -- -- (84,241) (84,241) 94,216 18,843 65,398 -- --
------- -------- ------- -------- --------- ---------- ----------- ------------ ---------
Balance at
December 31,
1999.............. 796,318 $796,318 665,759 $665,759 5,417,171 $1,083,434 $18,156,114 $(14,290,581) --
======= ======== ======= ======== ========= ========== =========== ============ =========
<CAPTION>
Total
Stockholders'
Equity
-------------
<S> <C>
Balance at January
1, 1997........... $ 9,135,200
Net loss.......... (1,388,964)
Unrealized Change
in Marketable
Securities........ 274,300
-------------
Total
Comprehensive
Income (Loss)..... (1,114,664)
Issuance of Series
B Preferred
Stock............. 7,500,000
Preferred stock
dividends
Series A ($.80
per share)...... (638,023)
Series B ($.76
per share)...... (567,187)
Conversion of
preferred stock to
Common Stock...... --
Employee Stock
grants............ 25,000
Retirement of
Series A Preferred
Stock............. (7,650)
-------------
Balance at
December 31,
1997.............. 14,332,676
-------------
Net loss.......... (7,715,342)
Unrealized Change
in Marketable
Securities........ (485,300)
-------------
Total
Comprehensive
Income (Loss)..... (8,200,642)
Preferred stock
dividends......... (1,255,638)
Employee and
director stock
grants............ 82,992
-------------
Balance at
December 31,
1998.............. 4,959,388
-------------
Net loss.......... (1,828,983)
Realized loss on
sale of marketable
Securities........ 400,900
-------------
Total
Comprehensive
Income (Loss)..... (1,428,083)
Issuance of Common
Stock Purchase
Warrants with
Preferred Stock... 210,000
Issuance of Common
Stock Purchase
Warrants for
services.......... 121,800
Issuance of Common
Stock Purchase
Warrants as
transaction fee... 234,000
Issuance of Common
Stock Purchase
Warrants with
debt.............. 2,280,000
Director Stock
Grants............ 30,000
Exercise of
Employee Stock
Options........... 3,939
Conversion of
Series B Preferred
Stock to Common
Stock............. --
-------------
Balance at
December 31,
1999.............. $ 6,411,044
=============
</TABLE>
* dividends are cumulative and arrearages amounted to $1,249,343 or $0.23 per
share at December 31, 1999
See notes to consolidated financial statements.
F-13
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE A--Description of Business
The Company is in the primary business of the exploration and production of
crude oil and natural gas. The subsidiaries have interests in such operations
in seven states, primarily in Louisiana and Texas. Two of the Company's
subsidiaries also had a minority interest in a natural gas pipeline joint
venture located in the state of Texas until such interest was sold in 1997.
NOTE B--Summary of Significant Accounting Policies
Principles of Consolidation--The consolidated financial statements include
the financial statements of Goodrich Petroleum Corporation, its wholly-owned
subsidiaries, and one of its wholly-owned subsidiary's three wholly-owned
subsidiaries. Significant intercompany balances and transactions have been
eliminated in consolidation.
Revenue Recognition--Revenues from the production of natural gas properties
in which the Company has an interest with other producers are recognized on the
entitlements method. Differences between actual production and net working
interest volumes are routinely adjusted. These differences are not significant.
Property and Equipment--The Company uses the successful effort method of
accounting for exploration and development expenditures.
Leasehold acquisition costs are capitalized. When proved reserves are found
on an undeveloped property, leasehold cost is reclassified to proved
properties. Significant undeveloped leases are reviewed periodically, and a
valuation allowance is provided for any estimated decline in value. Cost of all
other undeveloped leases is amortized over the estimated average holding period
of the leases.
Costs of exploratory drilling are initially capitalized, but if proved
reserves are not found, the costs are subsequently expensed. All other
exploratory costs are charged to expense as incurred. Development costs are
capitalized, including the cost of unsuccessful development wells.
The Company follows SFAS No. 121 and recognizes an impairment when the net
of future cash inflows expected to be generated by an identifiable long-lived
asset and cash outflows expected to be required to obtain those cash inflows is
less than the carrying value of the asset. The Company performs this comparison
for its oil and gas properties on a field-by-field basis using the company's
estimates of future commodity prices. The amount of such loss is measured based
on the difference between the discounted value of such net future cash flows
and the carrying value of the asset. The Company recorded such impairments in
1999, 1998 and 1997 in the amounts of $465,000, $1,076,000 and $550,000
respectively. The impairments were generally the result of certain fields
depleting earlier than anticipated.
Depreciation and depletion of producing oil and gas properties are provided
under the unit-of-production method. Proved developed reserves are used to
compute unit rates for unamortized tangible and intangible development costs,
and proved reserves are used for unamortized leasehold costs. Estimated
dismantlement, abandonment, and site restoration costs, net of salvage value,
are considered in determining depreciation and depletion provisions.
Gains and losses on disposals or retirements that are significant or include
an entire depreciable or depletable property unit are included in income. All
other dispositions, retirements, or abandonments are reflected in accumulated
depreciation, depletion, and amortization.
F-14
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Cash and Cash Equivalents--Cash and cash equivalents include cash on hand,
demand deposit accounts and temporary cash investments with maturities of
ninety days or less at date of purchase.
Marketable Equity Securities--The Company has classified its investment in
marketable equity securities as available for sale. Accordingly, unrealized
holding gains and losses are excluded from earnings and are reported as other
comprehensive income until realized. The Company sold its marketable equity
securities in January 1999.
Investment in Pipeline Joint Venture--Prior to its sale in October 1997, the
Company's investment consisted of a 20% interest in an intrastate natural gas
pipeline joint venture. The Company's carrying basis in the investment was
established at August 15, 1995 (fair value) and was being amortized on a basis
which matched the amortization with the monthly maximum average contract
quantities over the estimated remaining term of the joint venture. Amortization
amounted to $741,000 for the year ended December 31, 1997. The Company recorded
its equity in joint venture earnings as revenues in the statement of operations
in the periods when the contract payments were earned.
Income Taxes--The Company follows the provisions of SFAS No. 109, Accounting
for Income Taxes which requires income taxes be accounted for under the asset
and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Earnings Per Share--Basic income per Common share is computed by dividing
net income available for common stockholders, for each reporting period by the
weighted average number of Common shares outstanding during the period. Diluted
income per Common share is computed by dividing net income available for common
stockholders for each reporting period by the weighted average number of Common
shares outstanding during the period, plus the effects of potentially dilutive
Common shares.
Derivative Financial Instruments--The Company utilizes derivative
instruments such as futures, forwards, options, collars and swaps for purposes
of hedging its exposure to fluctuations in the price of crude oil and natural
gas. Gains and losses from derivatives designated as hedges of sales are
reported on the statement of income as an increase or reduction of oil and gas
sales in the period related to the actual sale of product. Premiums paid on
hedging contracts are amortized over the life of the contracts as a reduction
to oil and gas sales.
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. 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.
F-15
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock Based Compensation--The Company uses SFAS No. 123, Accounting for
Stock-Based Compensation, which permits entities to recognize as expense, over
the vesting period, the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply
the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees,
and provide pro forma net income and pro forma earnings per share and other
disclosures for employee stock options grants made in 1995 and future years as
if the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the disclosure provisions of SFAS No. 123.
Commitments and Contingencies--Liabilities for loss contingencies, including
environmental remediation costs, arising from claims, assessments, litigation,
fines and penalties, and other sources are recorded when it is probable that a
liability has been incurred and the amount of the assessment and/or remediation
can be reasonably estimated. Recoveries from third parties, which are probable
of realization, are separately recorded, and are not offset against the related
environmental liability.
Use of Estimates--Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
NOTE C--Private Placement
On September 23, 1999, the Company and two of its subsidiaries, Goodrich
Petroleum Company, L.L.C. ("Goodrich-Louisiana") and Goodrich Petroleum
Company-Lafitte, L.L.C. ("Goodrich-Lafitte"), completed a private placement of
$15 million of convertible securities. As described below the private placement
transaction accomplished the objectives of management's plan as set forth in
the Liquidity and Capital Resources section of the Company's 1998 Annual Report
on Form 10-K.
Goodrich-Louisiana issued convertible notes in the amount of $6,000,000 that
will accrue interest monthly at 8% per annum in arrears until October 1, 2002.
Unless extended or converted, the principal and accrued interest will be
repayable in 24 monthly installments, beginning October 1, 2002. Principal and
accrued interest may be converted by the holder at any time into the common
stock of the Company at the rate of $4 per share. These convertible notes are
secured by various collateral, including a mortgage on Goodrich-Louisiana's oil
and gas properties. The purchasers of these notes received one warrant to
purchase a share of the common stock of the Company at $.9375 (the closing
price on the date the transaction was negotiated) for every $4 of notes issued.
The warrants may be exercised at any time before their expiration on September
30, 2006.
Goodrich-Lafitte is a newly formed Louisiana limited liability company and
is the entity which owns a 49% interest in the Lafitte Field. Goodrich-Lafitte
also issued convertible notes in the amount of $6,000,000 that will accrue
interest at 8% per annum, monthly in arrears, until October 1, 2002. Unless
extended or converted, the principal and accrued interest will be repayable in
24 monthly installments, beginning October 1, 2002. Principal and accrued
interest may be converted by the holder at any time into the common stock of
the Company at the rate of $4 per share. As an alternative conversion right,
the principal and accrued interest under these notes may be converted into
common equity interests in Goodrich-Lafitte, after October 1, 2002, if neither
the common stock of the Company has a closing price of at least $3 per share
nor the net asset value per share of the Company is at least $3. These
convertible notes are secured by various collateral, including a mortgage on
Goodrich-Lafitte's oil and gas properties. The purchasers of these notes
received one warrant to purchase a share of the common stock of the Company at
$.9375 (the closing price on the date the transaction was negotiated) for every
$4 of notes issued. The warrants may be exercised at any time before their
expiration on September 30, 2006.
F-16
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Approximately $3.7 million of the proceeds from the Goodrich-Lafitte
convertible notes were used to purchase the aforementioned interest in the
Lafitte Field. The remaining proceeds are being used for development capital
expenditures and for general corporate and working capital purposes.
Additionally, Goodrich-Louisiana issued $3,000,000 of preferred interests
consisting of 300,000 preferred units with a par value and liquidation
preference of $10 per share. The fair value of the preferred units is recorded
as preferred stockholders' equity in a subsidiary company in the accompanying
financial statements. Distributions on the preferred units will accrue
quarterly in arrears at 8% per annum through September 30, 2002 at which time
the rate increases 2% per year, not to exceed 20%. Goodrich-Louisiana has the
right to redeem the units at any time. The preference amount and accrued
distributions may be converted by the holder at any time into the common stock
of the Company at $2 per share. On February 17, 2000 the holders of the
preferred units exercised their conversion privileges (See Note D). Each
preferred unit holder was also issued one warrant to purchase a share of common
stock of the Company for every $10 of preference value. The warrants are
exercisable at $1.50 per share at any time before their expiration on September
30, 2006.
Approximately $2,500,000 of the proceeds from issuance of the convertible
notes and preferred units was allocated to additional paid in capital as the
fair value of the warrants issued in connection with the securities, based on
the relative fair value of the two securities. $2,300,000 of the proceeds
allocable to additional paid in capital will be amortized as additional
interest cost over the original term of the related notes. The remaining
adjustment to additional paid in capital related to the preferred units will be
recorded as accretion in the value of the preferred stockholders' equity in a
subsidiary company. Transaction costs related to the private placement amounted
to approximately $1,500,000. The transaction costs allocable to the debt issue
of $1,320,000 will be amortized over the life of the convertible debt. The
balance at December 31, 1999 net of amortization was $1,370,000. The remaining
costs of $180,000 were allocated to, and offset against the carrying value of
the preferred units.
Under the terms of the Goodrich-Louisiana Operating Agreement, the holders
of preferred units have no voting rights unless the payment of distributions is
six months or more in arrears, in which event the holders of preferred units
may participate in the election of company managers. Goodrich-Louisiana is
precluded from issuing any new units having preference or priority over the
preferred units as to distributions, liquidation or redemption.
This transaction would normally have required approval of the Company's
shareholders according to the Shareholder Approval Policy of the New York Stock
Exchange (the "Exchange"). Pursuant to an exception to this policy, and based
on a determination by the Company's Audit Committee that the delay necessary in
securing shareholder approval prior to the transaction would seriously
jeopardize the financial viability of the Company, the Company's Audit
Committee approved the Company's omission to seek shareholder approval. The
Exchange accepted the Company's application for use of the exception.
NOTE D--Subsequent Events
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 Plaquemine 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 feet and an approximate 47.5% working interest in the deep
rights below 10,600 feet. 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
F-17
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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. In addition, as part of the purchase agreement,
the Company is required 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.
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 1,500,000 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,
will be 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.
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 per share. On February 17, 2000, all of the holders of the
Preferred Units, representing 100% 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 number of common shares outstanding to
approximately 8,416,000 and 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 $700,000 of the costs will be
funded in 2000.
F-18
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE F--Indebtedness
Indebtedness at December 31, 1999 and 1998 consists of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Bank Debt
Borrowings under credit facility, interest, at Compass
Prime plus 5/8% (see below) (weighted average rate at
December 31, 1999--8.1%); principal due July 1, 2001.. $27,090,617 $29,500,000
Convertible Notes Payable at the Subsidiary Level
Goodrich Petroleum Company, LLC $6,000,000 face amount,
interest at 8% maturing in 2004; (effective interest
rate of 13.0%)........................................ 4,931,250 --
Goodrich Petroleum--Lafitte LLC $6,000,000 face amount,
interest at 8% maturing in 2004; (effective interest
rate of 13.0%)........................................ 4,931,250 --
----------- -----------
36,953,117 29,500,000
Less current portion................................... 3,600,000 29,500,000
----------- -----------
Long-term debt, excluding current portion.............. $33,353,117 $ --
=========== ===========
</TABLE>
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%. Based on these
revised terms, $23,490,000 of the bank debt is classified as long-term debt as
of December 31, 1999.
Substantially all of the Company's assets are pledged to secure this credit
facility.
Interest paid during 1999, 1998 and 1997 amounted to $2,338,840, $1,904,809
and $1,038,221, respectively.
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.
Convertible Notes Payable
Goodrich-Louisiana issued convertible notes in the amount of $6,000,000 that
will accrue interest monthly at 8% in arrears until October 1, 2002. Unless
extended or converted, the principal and accrued interest will be repayable in
24 monthly installments, beginning October 1, 2002. Principal and accrued
interest may be converted by the holder at any time into the common stock of
the Company at the rate of $4 per share. These convertible notes are secured by
various collateral, including a mortgage on Goodrich-Louisiana's oil and gas
properties. The purchasers of these notes received one warrant to purchase a
share of the common stock of the Company at $.9375 (the closing price on the
date the transaction was negotiated) for every $4 of notes issued. The warrants
may be exercised at any time before their expiration on September 30, 2006. The
Company has the right to prepay the Goodrich-Louisiana notes.
F-19
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Goodrich-Lafitte also issued convertible notes in the amount of $6,000,000
that will accrue interest at 8% per annum accruing monthly in arrears until
October 1, 2002. Unless extended or converted, the principal and accrued
interest will be repayable in 24 monthly installments, beginning October 1,
2002. Principal and accrued interest may be converted by the holder at any time
into the common stock of the Company at the rate of $4 per share. As an
alternative conversion right, the principal and accrued interest under the
notes may be converted into common equity interests in Goodrich-Lafitte, after
October 1, 2002, if neither the common stock of the Company has a closing price
of at least $3 per share nor the net asset value per share of the Company is at
least $3. These convertible notes are secured by various collateral, including
a mortgage on Goodrich-Lafitte's oil and gas properties. The purchasers of
these notes received one warrant to purchase a share of the common stock of the
Company at $.9375 (the closing price on the date the transaction was
negotiated) for every $4 of notes issued. The warrants may be exercised at any
time before their expiration on September 30, 2006. The Company can prepay the
Goodrich-Lafitte Convertible notes with a 10% prepayment penalty.
Approximately $2,300,000 of the proceeds from issuance of the convertible
notes was allocated to additional paid in capital as the fair value of the
warrants issued in connection with the securities based on the relative fair
value of the two securities. This amount is being amortized as additional
interest cost over the original term of the notes and amounted to $142,500 for
the period ended December 31, 1999.
The aggregate maturities of indebtedness for each of the five years
subsequent to December 31, 1999 are as follows: 2000, $3,600,000; 2001,
$23,500,000; 2002, $1,907,000; 2003, $7,627,000 and 2004, $5,721,000.
NOTE G--Income Taxes
Income tax expense for the years ending December 31, 1999, 1998 and 1997
consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Year Ended December 31, 1999:
U.S. Federal.......................................... $ -- $ -- $--
State................................................. -- -- --
------- -------- ---
-- -- --
======= ======== ===
Year Ended December 31, 1998:
U.S. Federal.......................................... $ -- $ -- $--
State................................................. -- -- --
------- -------- ---
-- -- --
======= ======== ===
Year Ended December 31, 1997:
U.S. Federal.......................................... $14,643 $(14,643) $--
State................................................. -- -- --
------- -------- ---
$14,643 $(14,643) $--
======= ======== ===
</TABLE>
F-20
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following is a reconciliation of the U.S. statutory income tax rate to
the Company's effective rate on income (loss) before income taxes for the years
ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
U.S. Statutory Income Tax Rate......................... (35.0)% (35.0)% (35.0)%
Increase in deductible temporary differences for which
no benefit recorded................................... 35.0 34.6 34.9
Change in the beginning of the year balance of the
valuation allowance allocated to income tax income
expense............................................... -- -- --
Nondeductible expenses................................. -- .4 .1
----- ----- -----
-- -- --
===== ===== =====
</TABLE>
The significant components of deferred income tax expense for the years
ended December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- -----------
<S> <C> <C> <C>
Deferred tax benefit (exclusive of utilization of net
operating loss carryforwards)......................... -- -- (1,023,016)
Utilization of net operating loss carryforward......... $ -- $-- $ 1,008,373
---- --- -----------
$ -- $-- $ (14,643)
==== === ===========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1999 and 1998 are presented below.
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Differences between book and tax basis of:
Marketable equity securities...................... $ -- $ 280,471
Contingent liabilities............................ 132,349 158,873
Other............................................... 8,750 65,199
Operating loss carryforwards........................ 13,384,419 13,109,624
Statutory depletion carryforward.................... 5,974,726 5,657,865
AMT Tax credit carryforward......................... 1,477,872 1,477,872
Investment tax credit carryforward.................. 2,108 98,574
------------ ------------
Total gross deferred tax assets..................... 20,980,224 20,848,478
Less valuation allowance............................ (19,784,669) (19,104,959)
------------ ------------
Net deferred tax assets............................. 1,195,555 1,743,519
------------ ------------
Deferred tax liability:
Differences between book and tax basis of:
Property and equipment............................ (1,155,912) (1,703,876)
------------ ------------
Total gross deferred liability...................... (1,155,912) (1,703,876)
------------ ------------
Net deferred tax asset.............................. $ 39,643 $ 39,643
============ ============
</TABLE>
The valuation allowance for deferred tax assets increased $680,000 and
decreased $2,221,000 for the years ended December 31, 1999 and 1998,
respectively. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future
F-21
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. Based primarily upon the level of projections for
future taxable income generated primarily by the reversal of future taxable
temporary differences over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences, net of the existing
valuation allowance at December 31, 1999. The amount of the deferred tax assets
considered realizable, however, could be reduced in the near term if estimates
of future taxable income during the carryforward period are reduced.
The following table summarizes the amounts and expiration dates of operating
loss and investment tax credit carryforwards:
<TABLE>
<CAPTION>
Investment tax credit
Operating loss carryforwards carryforwards
---------------------------- ---------------------
Amount Expires Amount Expires
------ ------- ------ -------
<S> <C> <C> <C>
$ 973,053 2005 $2,108 2001
7,093,823 2006
8,860,622 2007
4,285,746 2008
3,247,494 2009
5,480,870 2010
600,706 2011
1,939,496 2012
4,530,029 2018
1,229,359 2019
-----------
$38,241,198
===========
</TABLE>
As a result of the August 15, 1995 business combination, the Company's
annual utilization of its net operating and statutory depletion carryforwards
generated prior to the business combination are limited under Internal Revenue
Code Section 382. Such limitation is determined annually and is comprised of a
base amount of $1,682,797 plus any recognized "built in gains" existing at
August 15, 1995. Such limitation amounted to $19,282,000 in 1998 and is
estimated to be $22,194,000 in 1999.
As a result of the conversion of the preferred units and private placement
(See Note D) in February 2000, the annual limitation of the Company's existing
net operating losses and statutory depletion carryforwards will be
approximately $2,200,000 in 2000 and beyond. The Company's statutory depletion
carryforwards and AMT credit carryovers have no expiration date.
The Company paid income taxes of $4,344 in 1998.
NOTE H--Production Payment Obligation
A production payment was entered into by the Company to assist in the
financing of the Lafitte Field acquisition in September 1999. The original
amount of the production payment obligation was $2,940,000, which was recorded
as a production payment liability of $2,228,000 after a discount to reflect an
effective rate of interest of 11.25%. At December 31, 1999 the remaining
principle amount was $2,825,000 and the recorded liability was $2,113,000.
Under the terms of the production payment the Company must make monthly cash
payments which approximates the Company's 49% share of 10% of monthly gross oil
and gas revenue of the Lafitte Field.
F-22
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company's estimate as of December 31, 1999, based on expected production
and prices and expected discount amortization is that projected payments will
decrease the recorded liability as follows: 2000, $482,000; 2001, $817,000 and
2003, $814,000.
NOTE I--Stockholders' Equity
Common Stock--At December 31, 1999 unissued shares of Goodrich common stock
were reserved in the amount of 1,074,147 shares for the conversion of
convertible preferred stock and 463,134 shares for stock option plans. The
Company also has 9,500,000 shares of its common stock reserved for the
conversion of convertible debt, convertible preferred stock and stock warrants
issued in connect with the Private Placement transaction of September 23, 1999
(See Note C).
Preferred Stock
The Series A Convertible Preferred Stock has a par value of $1 per share
with a liquidation preference of $10 per share, and is convertible at the
option of the holder at any time, unless earlier redeemed, into shares of
Common Stock of the Company at an initial conversion rate of .417 shares of
Common stock per share of Series A Preferred. The Series A Preferred Stock also
will automatically convert to Common Stock if the closing price for the Series
A Preferred Stock exceeds $15 per share for ten consecutive trading days. The
Series A Preferred Stock is redeemable in whole or in part, at $12 per share,
plus accrued and unpaid dividends. Dividends on the Series A Preferred Stock
accrue at an annual rate of 8% and are cumulative.
The Company issued 750,000 shares of Series B Convertible Preferred Stock in
connection with its acquisition of the La/Cal II properties on January 31,
1997. The Series B Convertible Preferred Stock has a par value of $1 per share
with a liquidation preference of $10 per share and rank junior to the Series A
Preferred Stock. The shares of Series B Preferred Stock are convertible at the
option of the holder at any time, unless earlier redeemed, into shares of
Common Stock of the Company at the conversion rate of 1.12 shares of Common
Stock per share of Series B Preferred Stock. During 1999 holders of 84,241
shares of Series B preferred stock opted to convert their shares into 94,216
shares of common stock of the Company. The Series B Preferred Stock are not
redeemable by the Company prior to January 31, 2001, and subsequently, are
redeemable at $10 per share. Dividends on the Series B Preferred Stock accrue
at an annual rate of 8.25% and are cumulative.
Stock Option and Incentive Programs--Goodrich currently has two plans, which
provide for stock option and other incentive awards for the Company's key
employees, consultants and directors. The Goodrich Petroleum Corporation 1995
Stock Option Plan allows the board of directors to grant stock options,
restricted stock awards, stock appreciation rights, long-term incentive awards
and phantom stock awards, or any combination thereof to key employees and
consultants. The Goodrich Petroleum Corporation 1997 Director Compensation Plan
provides for the grant of stock and options to each director who is not and has
never been an employee of the Company. Additionally, Goodrich assumed certain
outstanding stock options of Patrick as a result of the business combination in
1995.
The Goodrich plans authorize grants of options to purchase up to a combined
total of 437,500 shares of authorized but unissued common stock. Stock options
are generally granted with an exercise price equal to the stock's fair market
value at the date of grant and all stock options granted under the 1995 Stock
Option Plan generally have ten year terms and three year pro rata vesting.
The per share weighted-average fair value of stock options granted during
1999, 1998 and 1997 was $1.59, $2.17 and $2.57 on the date of grant using the
Black Scholes option-pricing model with the following weighted-average
assumptions: 1999--expected dividend yield 0%, risk-free interest rate of 7.5%,
and an expected life of six years; 1998--expected dividend yield 0%, risk-free
interest rate of 7.5%, and an expected life of six years; 1997--expected
dividend yield 0%, risk-free interest rate of 7.5%, and an expected life of six
years; expected volatility of stock over expected life of the options--35%.
F-23
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company applies APB Opinion No. 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based on
the fair value at the grant date for its stock options under SFAS No. 123, the
Company's net loss would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss..................... As reported $(1,828,983) $(7,715,342) $(1,388,964)
Pro forma (2,109,357) (7,906,618) (1,452,644)
Loss applicable to........... As reported (3,078,326) (8,970,980) (2,594,174)
common stock................ Pro forma (3,358,700) (9,162,256) (2,657,854)
Basic and diluted loss
per average................. As reported (.58) (1.71) (.50)
common share................ Pro forma (.64) (1.75) (.51)
</TABLE>
Earnings Per Share--Both series of the Company's convertible preferred stock
and its stock options are considered to be potential common stock. Additionally
convertible debt, convertible preferred stock and stock purchase warrants
issued in conjunction with the aforementioned private placement (See Note C)
are also considered potential common stock. No potential common stock amounts
have not been included in the computation of diluted earnings per share because
to do so would have been antidillutive for all periods presented.
Stock option transactions during 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Weighted Weighted Average
Number of Average Remaining
Options Exercise Price Range of Exercise Price Contractual Life
----------------- -------------- ----------------------- -----------------
Patrick Patrick Patrick Patrick
Total Only Total Only Total Only Total Only
-------- ------- ------ ------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding January 1,
1997................... 353,942 157,067 12.48 18.70 $ 6 to $ 24 $16 to $24 5.4 yrs. 2.0 yrs.
Granted--1995 Stock
Option Plan........... 67,500 -- 6.48 --
Granted--1995 Non-
Employee Director
Stock Option Plan..... 6,250 -- 5.52 --
Expiration of Options.. (86,250) (86,250) 18.80 18.78
-------- -------
Outstanding December 31,
1997................... 341,442 70,817 9.60 18.60 $5.50 to $24 $16 to $24 7.4 yrs. 4.2 yrs.
======== =======
Granted--1995 Stock
Option Plan........... 144,000 -- 5.98 --
Granted--1997 Director
Compensation Plan..... 10,000 -- 5.98 --
Expiration of Options.. (62,190) (5,625) 7.88 19.33
-------- -------
Outstanding December 31,
1998................... 433,252 65,192 $5.50 to $24 $16 to $24 7.0 yrs. 3.4 yrs.
======== =======
Granted--1995 Stock
Option................ 374,196 -- 1.37 --
Granted--1997 Director
Stock Option.......... 37,063 -- .80 --
Expiration/Surrender of
Options............... (381,377) (29,567) 7.61 18.00
-------- ------- ------ -----
Outstanding December 31,
1999................... 463,134 35,625 $0.75 to $24 $16 to $24 8.5 yrs. 2.9 yrs.
======== =======
Exercisable December 31,
1997................... 172,317 70,817 $12.13 18.60
Exercisable December 31,
1998................... 208,379 65,192 $10.86 18.54
Exercisable December 31,
1999................... 71,438 35,625 $ 9.95 19.00
</TABLE>
At the February 25, 1999 board of directors meeting, the Compensation
Committee voted to institute a stock option surrender/re-grant program whereby
employees and directors of the Company were able to surrender their present
options and be re-granted a number of options equal to 75% of their previous
number of options. Vesting periods for the re-granted options began with the
re-grant date and the options have a strike price equal to the closing stock
price of the date of declaration by the board of directors.
F-24
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE J--Series A Preferred Stock
The terms of the Company's Series A Preferred Stock provides that the
Company will not incur additional debt at the parent company level 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 December 31, 1999, the Company's stockholders' equity was
approximately $6.4 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 was unable to incur additional debt at the parent company
level under its credit facility or from other sources. On February 17, 2000,
the Company completed a $4,500,000 private placement transaction of 1,500,000
shares of common stock, and effected the conversion of all the outstanding
Goodrich Petroleum Company, LLC Series A Preferred Units, which converted into
1,533,333 shares of the Company's common stock. The conversion of the preferred
units and private placement increased stockholders equity by approximately
$7,200,000, which makes total stockholders equity exceed the liquidation
preference on the Series A Preferred Stock. As a result, the Company's
restriction on funds at the parent Company level has been eliminated.
NOTE K--Hedging Activities
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 prices or
prices 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 December 31, 1999, the Company's open forward position on its
outstanding crude oil was as follows:
(d) 350 barrels of oil per day with a no cost "collar" of $19 and $21
per barrel through December 2000;
(e) 150 barrels of oil per day with a no cost "collar" of $18.20 and
$20.20 per barrel through December 2000; and
(f) 300 barrels of oil per day on a crude oil "swap" with a price of
$23.98 per barrel through April 2000.
At December 31, 1999 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.
F-25
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 31, 1999 the Company's open forward position on its outstanding
gas hedging contract 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 Company is exposed to credit losses in the event of non performance by
the counterparties to its hedging contracts. The Company anticipates, however,
that counterparties will be able to fully satisfy their obligations under the
contracts. The Company does not obtain collateral to support financial
instruments but monitors the credit standing of the counterparties.
Price fluctuations and 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 prices for oil and gas could have a material
adverse effect on the Company's financial position, results of operations and
quantities of reserves recoverable on an economic basis.
NOTE L--Fair Value of Financial Instruments
The following presents the carrying amounts and estimated fair values of the
Company's financial instruments at December 31, 1999 and 1998.
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
---------------------- ---------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial asset--
Marketable equity securities... $ -- -- 358,700 358,700
Financial liabilities--
Long-term debt (including
current maturities)........... $27,090,617 27,090,617 29,500,000 29,500,000
Notes payable.................. $ 9,862,500 9,862,500 -- --
Production payment liability... $ 2,113,000 2,113,000 -- --
Hedges Asset (Liability)--
Oil............................ $ -- (338,398) -- --
Gas............................ $ -- 300,410 -- --
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and cash equivalents, accounts receivable, accounts payables and
accrued liabilities: The carrying amounts approximate fair value because of the
short maturity of those instruments. Therefore, these instruments were not
presented in the table above.
Marketable equity securities: Fair value is based on bid prices published in
financial media.
Long term debt and other noncurrent liabilities: The fair value is estimated
using the discounted cash flow method based on the Company's borrowing rates or
similar types of financing arrangements.
NOTE M--Concentrations of Credit Risk and Significant Customers
Due to the nature of the industry the Company sells its oil and natural gas
production to a limited number of purchasers and, accordingly, amounts
receivable from such purchasers could be significant. Additionally,
F-26
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
prior to the sale of the Company's interest in its pipeline joint venture in
1997, it received net monthly payments from its partner, Mitchell Marketing
Company. Revenues from these sources as a percent of total revenues for the
periods presented were as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Seaber Corporation of Louisiana.................................. 37% 47% 44%
Equiva Trading................................................... 27 12 11
Texla Energy Management.......................................... 10 -- --
Navajo Refining Company.......................................... 7 11 --
Mobil Oil Corporation............................................ -- -- 10
Mitchell Marketing Company....................................... -- -- 9
</TABLE>
NOTE N--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 estimates 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 estimated to be approximately 3.05%. As of December 31, 1999,
the Company had paid $321,000 in costs related to this matter and accrued
$122,500 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.
On February 8, 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 operations or financial
position of the Company.
The Company is party to additional lawsuits arising in the normal course of
business. The Company intends to defend these actions vigorously and believes,
based on currently available information, that adverse results or judgments
from such actions, if any, will not be material to its financial position or
results of operations.
NOTE O--Natural Gas and Crude Oil Cost Data and Results of Operations.
The following reflects the Company's capitalized costs related to natural
gas and oil activities at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Proved properties...................................... $61,527,593 $49,916,276
Unproved properties.................................... 3,873,575 3,412,897
----------- -----------
65,401,168 53,329,173
Less accumulated depreciation and depletion............ 19,398,287 13,592,827
----------- -----------
Net property and equipment........................... $46,002,881 $39,736,346
=========== ===========
</TABLE>
F-27
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table reflects certain data with respect to natural gas and
oil property acquisitions, exploration and development activities:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Property acquisition
Proved.............................. $10,136,298(a) $ 129,325 $17,308,540(b)
Unproved............................ 498,391 2,446,474 886,647
Exploration......................... 1,634,299 8,718,682 5,535,783
Development........................... 1,960,371 8,169,741 3,598,177
----------- ----------- -----------
$14,229,359 $19,464,222 $27,329,147
=========== =========== ===========
</TABLE>
--------
(a) Primarily Lafitte Field acquisition inclusive of liabilities assumed in
connection with the purchase.
(b) Includes properties acquired in the La/Cal II Acquisition including
portions funded with Serial B Preferred Stock ($7,500,000).
Results of operations for natural gas and oil producing activities follow:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Sales to unaffiliated customers.......... $13,734,691 $ 9,836,863 $11,351,586
Production costs (lease operating expense
and taxes).............................. 3,591,427 2,821,515 2,316,006
Exploration expenses..................... 1,656,158 6,010,425 3,205,730
Impairment of oil and gas properties..... 465,465 1,075,853 549,792
Depreciation, depletion and
amortization............................ 4,702,240 4,038,547 4,065,998
----------- ----------- -----------
10,415,290 13,946,340 10,137,526
----------- ----------- -----------
Results of operations.................... $ 3,319,401 $(4,109,477) $ 1,214,060
=========== =========== ===========
</TABLE>
No income taxes have been reflected above for the Company due to its net
operating losses.
NOTE P--Supplemental Oil and Gas Reserve Information (Unaudited)
The supplemental oil and gas reserve information that follows is presented
in accordance with SFAS No. 69, Disclosures about Oil and Gas Producing
Activities. The schedules provide users with a common base for preparing
estimates of future cash flows and comparing reserves among companies.
Additional background information follows concerning the schedules.
Schedules 1 and 2--Estimated Net Proved Oil and Gas Reserves
Substantially all of the Company's reserve information related to crude oil,
condensate, and natural gas liquids and natural gas was compiled based on
evaluations performed by Coutret and Associates, Inc. All of the subject
reserves are located in the continental United States.
Many assumptions and judgmental decisions are required to estimate reserves.
Quantities reported are considered reasonable but are subject to future
revisions, some of which may be substantial, as additional information becomes
available. Such additional knowledge may be gained as the result of reservoir
performance, new geological and geophysical data, additional drilling,
technological advancements, price changes, and other factors.
F-28
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Regulations published by the Securities and Exchange Commission define
proved reserves as those volumes of crude oil, condensate, and natural gas
liquids and natural gas that geological and engineering data demonstrate with
reasonable certainty are recoverable from known reservoirs under existing
economic and operating conditions. Proved developed reserves are those volumes
expected to be recovered through existing wells with existing equipment and
operating methods. Proved undeveloped reserves are those volumes expected to
be recovered as a result of making additional investment by drilling new wells
on acreage offsetting productive units or recompleting existing wells.
Schedule 3--Standardized Measure of Discounted Future Net Cash Flows to
Proved Oil and Gas Reserves
SFAS No. 69 requires calculation of future net cash flows using a 10%
annual discount factor and year end prices, costs, and statutory tax rates,
except for known future changes such as contracted prices and legislated tax
rates.
The calculated value of proved reserves is not necessarily indicative of
either fair market value or present value of future cash flows because prices,
costs, and governmental policies do not remain static; appropriate discount
rates may vary; and extensive judgment is required to estimate the timing of
production. Other logical assumptions would likely have resulted in
significantly different amounts. Crude oil prices received for oil and the
price received by well for natural gas, effective at the end of each year,
were used for this calculation, and averaged $25.16 per bbl and $2.63 per Mcf,
respectively as of December 31, 1999; $9.37 per Bbl and $2.24 per Mcf,
respectively as of December 31, 1998, and $16.50 per Bbl and $2.59 per Mcf,
respectively as of December 31, 1997.
Schedule 3 also presents a summary of the principal reasons for change in
the standard measure of discounted future net cash flows for each of the three
years in the period ended December 31, 1999.
Schedule 1--Estimated Net Proved Gas Reserves (Mcf)
<TABLE>
<CAPTION>
Pro
Year Ended December 31, Forma (b)
---------------------------------- ----------
1999 1998 1997 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Proved:
Balance, beginning of period.. 28,144,310 37,570,614 18,184,738
Revisions of previous
estimates.................... (6,069,885) (8,393,772) (1,582,986)
Purchase of minerals in
place........................ 1,705,822 226,778 3,761,481
Extensions, discoveries, and
other additions.............. -- 1,656,200 19,707,712
Production.................... (2,930,655) (2,782,825) (2,449,320)
Sales of minerals in place.... -- (132,685) (51,011)
---------- ---------- ----------
Balance, end of period........ 20,849,592 28,144,310 37,570,614 26,805,069
========== ========== ==========
Proved developed:
Beginning of period........... 21,481,946 16,600,669 13,911,003
End of period................. 13,945,450 21,481,946 16,600,669 19,900,930
</TABLE>
F-29
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Schedule 2--Estimated Net Proved Oil Reserves (Barrels)
<TABLE>
<CAPTION>
Pro
Year Ended December 31, Forma (b)
------------------------------- ---------
1999 1998 1997 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Proved:
Balance, beginning of period...... 3,092,810 4,098,390 1,050,210
Revisions of previous estimates... (12,989) (988,611) 132,327
Purchase of minerals in place..... 3,053,618 -- 1,614,779
Extensions, discoveries, and other
additions........................ -- 299,799 1,685,438
Production........................ (394,442) (316,768) (282,380)
Sale of minerals in place......... -- -- (101,984)
--------- --------- ---------
Balance, end of period............ 5,738,997 3,092,810 4,098,390 6,630,331
========= ========= =========
Proved, developed:
Beginning of period............... 2,266,854 2,292,626 969,868
End of period..................... 2,662,907 2,266,854 2,292,626 3,554,241
</TABLE>
The following table summarizes the Company's combined oil and gas reserve
information on a Mcf equivalent basis. Estimates of reserves were converted
using a conversion ratio of 1.0/6.0 Mcf.
<TABLE>
<CAPTION>
Pro
Year Ended December 31, Forma (b)
-------------------------------- ----------
1999 1998 1997 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Estimated Net Proved Reserves
(Mcfe):
Total Proved.................... 55,283,574 46,701,170 62,160,954 65,587,055
Proved Developed................ 29,922,892 35,083,070 30,356,425 41,226,376
</TABLE>
Schedule 3--Standardized Measure of Discounted Future Net Cash Flows Related to
Proved Oil and Gas Reserves
<TABLE>
<CAPTION>
Pro
Year Ended December 31, Forma (b)
---------------------------- --------
1999 1998 1997 1999
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Future cash inflows................... $182,292 $ 86,449 $155,542 $218,365
Production costs...................... (31,647) (18,617) (18,985) (46,974)
Development costs..................... (15,458) (5,722) (7,921) (21,533)
Future income tax expense(a).......... (21,534) -- (24,177) (24,808)
-------- -------- -------- --------
Future net cash flows................. 113,653 62,110 104,459 125,050
10% annual discount for estimated
timing of cash flows................. (35,092) (21,475) (40,456) (36,095)
-------- -------- -------- --------
Standardized measure of discounted
future net cash flows................ $ 78,561 $ 40,635 $ 64,003 $ 88,955
======== ======== ======== ========
Average year end prices:
Natural gas (per Mcf)............... $ 2.63 $ 2.24 $ 2.59
Crude oil (per Bbl)................. $ 25.16 $ 9.37 $ 16.50
</TABLE>
--------
(a) Taxable income for 1998 period was entirely offset by available net
operating loss carryforwards.
(b) Pro forma amounts include reserve information related to acquisition of
Burrwood/West Delta 83 fields in February 2000 (see Note D).
F-30
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following are the principal sources of change in the standardized
measure of discounted net cash flows for the years shown:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Net changes in prices and production costs
related to future production................... $ 33,360 $(31,820) $(32,327)
Sales and transfers of oil and gas produced, net
of production costs............................ (10,144) (7,015) (9,036)
Net change due to revisions in quantity
estimates...................................... (10,277) (12,464) (991)
Net change due to extensions, discoveries and
improved recovery.............................. -- 3,006 37,465
Net change due to purchase and sales of
minerals-in-place.............................. 33,476 82 16,065
Development costs incurred during the period.... 338 2,198 3,598
Net change in income taxes...................... (13,845) 14,093 (4,094)
Accretion of discount........................... 4,064 7,810 5,736
Change in production rates (timing) and other... 954 742 230
-------- -------- --------
$ 37,926 $(23,368) $ 16,646
======== ======== ========
</TABLE>
F-31
<PAGE>
Consolidated Quarterly Income Information
(Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1999
Revenues.............. $2,941,696 $2,829,530 $3,631,762 $4,617,586 $14,020,574
Costs and Expenses.... 3,458,450 3,405,546 3,283,633 5,182,433 15,330,062
Loss on sale of
assets............... (519,495) -- -- -- (519,495)
Net income (loss)..... (1,036,249) (576,016) 348,129 (564,847) (1,828,983)
Preferred stock
dividends............ 313,912 313,912 313,912 307,607 1,249,343
Earnings (loss)
applicable to common
stock................ (1,350,161) (889,928) 34,217 (872,454) (3,078,326)
Basic earnings (loss)
per average
common share......... $ (.26) (.17) .01 (.16) (.58)
Diluted earnings
(loss) per average
common share......... $ (.26) (.17) .01 (.16) (.58)
1998
Revenues.............. $2,433,577 $2,264,397 $2,697,743 $3,196,156 $10,591,873
Costs and Expenses.... 3,446,298 5,215,164 4,813,328 4,836,631 18,311,421
Gain on sale of
assets............... 4,206 -- -- -- 4,206
Net income (loss)..... (1,008,515) (2,950,767) (2,115,585) (1,640,475) (7,715,342)
Preferred stock
dividends............ 313,912 313,902 313,912 313,912 1,255,638
Earnings (loss)
applicable to common
stock................ (1,322,427) (3,264,669) (2,429,497) (1,954,387) (8,970,980)
Basic earnings (loss)
per average
common share......... $ (.25) (.62) (.46) (.38) (1.71)
Diluted earnings
(loss) per average
common share......... $ (.25) (.62) (.46) (.38) (1.71)
</TABLE>
The fourth quarter amount includes impairment of oil and gas properties of
$465,000. In addition the fourth quarter of 1999 is impacted by revenue and
expenses associated with the acquisition of the Lafitte field and issuance of
convertible notes payable.
The first, second, third and fourth quarter of 1998 cost and expense amounts
contain costs amounting to $0, $2,107,000, $1,496,000 and $81,000,
respectively, related to dry holes. The fourth quarter amount also contains
impairment of oil and gas properties of $1,076,000.
F-32
<PAGE>
[Goodrich Logo appears here]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 7,685
NASD filing fee.................................................... $ 3,411
NYSE listing fee................................................... $ 25,000
Legal fees and expenses............................................ $250,000
Engineering fees and expenses...................................... $ 20,000
Accounting fees and expenses....................................... $120,000
Printing expenses.................................................. $ 75,000
Miscellaneous...................................................... $ 98,904
--------
TOTAL............................................................ $600,000
========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise), against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any
such person serving in any such capacity who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or such other court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
Our certificate of incorporation provides that indemnification shall be to
the fullest extent permitted by the DGCL for all of our current or former
directors or officers.
As permitted by the DGCL, the certificate of incorporation provides that our
directors shall have no personal liability to us or our stockholders for
monetary damages for breach of fiduciary duty as a director, except (1) for any
breach of the director's duty of loyalty to us or our stockholders, (2) for
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (3) under Section 174 of the DGCL or (4) for any
transaction from which a director derived an improper personal benefit.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
On September 23, 1999, we and two of our subsidiaries, Goodrich Petroleum
Company, L.L.C. and Goodrich Petroleum Company-Lafitte, L.L.C., completed a
private placement of $15 million of convertible securities. H&Q Guaranty acted
as placement agent for this transaction, for which it received a fee of
$900,000. The following securities were issued:
. Our wholly owned subsidiary, Goodrich-Louisiana, issued convertible
notes in the amount of $6,000,000 to a group of accredited investors.
Principal and accrued interest was convertible by the holder into our
common stock at the rate of $4 per share. The purchasers of these notes
received 1,500,000 warrants to purchase shares of our common stock at
$1.00 per share. The warrants may be exercised at any time before their
expiration on September 30, 2006. The securities were issued in a
transaction exempt pursuant to Section 4(2) of the Securities Act and
Rule 506 of Regulation D;
. Our wholly owned subsidiary, Goodrich-Lafitte, issued convertible notes
in the amount of $6,000,000 to a group of accredited investors.
Principal and accrued interest was convertible by the holder into our
common stock at the rate of $4 per share. As an alternative conversion
right, the principal and accrued interest under these notes was
convertible into common equity interests in Goodrich-Lafitte, after
October 1, 2002, if neither our common stock has a closing price of at
least $3 per share nor our net asset value per share is at least $3. The
purchasers of these notes received 1,500,000 warrants to purchase shares
of our common stock at $1.00 per share. The warrants may be exercised at
any time before their expiration on September 30, 2006. The securities
were issued in a transaction exempt pursuant to Section 4(2) of the
Securities Act and Rule 506 of Regulation D; and
. Additionally, our wholly owned subsidiary Goodrich-Louisiana issued
$3,000,000 of preferred interests to a group of accredited investors
consisting of 300,000 preferred units with a par value and liquidation
preference of $10 per share. Each preferred unit holder was also issued
one warrant to purchase a share of common stock of the Company for every
$10 of preference value. The warrants are exercisable at $1.50 per share
at any time before their expiration on September 30, 2006. Goodrich-
Louisiana has the right to redeem the units at any time. The purchasers
of these preferred interests received 300,000 warrants to purchase
shares of our common stock at $1.50 per share. The preference amount and
accrued distributions were convertible by the holder into our common
stock at $2 per share. The securities were issued in a transaction
exempt pursuant to Section 4(2) of the Securities Act and Rule 506 of
Regulation D.
On February 17, 2000, the holders of the preferred units in Goodrich-
Louisiana elected to convert their units into common stock of the Company. Each
holder was an accredited investor. The transaction was exempt pursuant to
Section 4(2) of the Securities Act. Entreprenurial Investment Corporation and
Mr. Malloy each received 12,500 of our common shares in connection with their
underwriting and assistance in this transaction.
On February 18, 2000, in a transaction exempt pursuant to Section 4(2) of
the Securities Act and Rule 506 of Regulation D, we completed a private
placement to a group of accredited investors of 1,500,000 shares of our common
stock resulting in net proceeds to us of $4,500,000. H&Q Guaranty acted as
underwriter, for which it received 8,333 shares of our common stock.
On August 17, 2000, the holders of all of the convertible notes of
Goodrich-Louisiana and Goodrich-Lafitte elected to convert their notes into
common stock of the Company. Each holder was an accredited investor. The
transaction was exempt pursuant to Section 4(2) of the Securities Act. We
issued an aggregate of 3,295,647 shares in connection with this transaction,
including 60,000 shares of common stock issued to H&Q Guaranty, Entreprenurial
Investment Corporation and Mr. Malloy in connection with their underwriting and
assistance in this transaction.
On October 23, 2000, in a transaction exempt pursuant to Section 4(2) of the
Securities Act and Rule 506 of Regulation D, we completed a private placement
of 1,000,000 shares of our common stock to a group of accredited investors for
aggregate gross proceeds of $5.0 million. We received irrevocable commitments
to
II-2
<PAGE>
purchase these shares on September 28, 2000. H&Q Guaranty acted as placement
agent, for which it received $250,000 in cash. Jefferies & Company, Inc.
received an advisory fee of $100,000 for the provision of financial advisory
services in connection with this transaction.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
<TABLE>
<C> <S>
3.1a* --Restated Certificate of Incorporation of Goodrich Acquisition II,
Inc. dated January 31, 1997.
3.1b* --Certificate of Amendment of Restated Certificate of Incorporation
of Goodrich Acquisition II, Inc. dated January 31, 1997.
3.2* --Certificate of Amendment of Restated Certificate of Incorporation
of Goodrich Petroleum Corporation dated March 12, 1998
(Incorporated by reference to Exhibit 3.2 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1997
(File No. 1-12719)).
3.3* --Bylaws of the Company, as amended and restated.
4.1* --Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.5 of the Company's Registration Statement filed February
20, 1996 on Form S-8 (File No. 33-01077)).
4.2* --Series B Convertible Preferred Stock Certificate of Designations.
(Incorporated by reference to Exhibit 4.5 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 (File No.
1-12719)).
5.1 --Opinion of Vinson & Elkins L.L.P.
10.1* --Goodrich Petroleum Corporation 1995 Stock Option Plan.
10.2(a) --Goodrich Petroleum Corporation 1997 Director Compensation Plan
(Incorporated by reference to the Company's Proxy statement dated
May 20, 1998).
10.3(b)* --Form of Registration Rights Agreement (2000 Private Placements).
10.4(c) --Credit Agreement between Goodrich Petroleum Company, L.L.C. and
Compass Bank dated September 23, 1999 (Incorporated by reference
to Exhibit 4.1 of the Company's Form 8-K filing dated September
23, 1999 (File No. 1-12719)).
10.5* --First amendment to the September 23, 1999 Credit Agreement
between Goodrich Petroleum Company, LLC and Compass Bank dated
February 29, 2000. (Incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
(File No. 1-12719)).
10.6* --Letter Agreement amending Credit Agreement between Goodrich
Petroleum Company, L.L.C. and Compass Bank dated November 8, 2000.
21.1 --Subsidiaries of the Company:
Goodrich Petroleum Company, L.L.C.--incorporated in state of
Louisiana
Goodrich Petroleum Company--Lafitte, L.L.C.
Subsidiaries of Goodrich Petroleum Company of Louisiana
Drilling & Workover Company, Inc.--incorporated in state of
Louisiana
LECE, Inc.--incorporated in the state of Texas
National Market Company--incorporated in state of Delaware
23.1 --Consent of KPMG LLP
23.2 --Consent of Coutret & Associates, Inc.
23.3 --Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1)
24.1* --Power of Attorney (included in signature page)
27.1* --Financial Data Schedule
</TABLE>
--------
* Previously filed.
II-3
<PAGE>
(a) Filed as Exhibit 10.6 to the Company's Registration Statement on Form S-1
filed on September 29, 2000 (Registration No. 333-47078).
(b) Filed as Exhibit 10.8 to the Company's Registration Statement on Form S-1
filed on September 29, 2000 (Registration No. 333-47078).
(c) Filed as Exhibit 10.9 to the Company's Registration Statement on Form S-1
filed on September 29, 2000 (Registration No. 333-47078).
(b) Financial Statement Schedule
All schedules are omitted because the information is contained in the
Financial Statements or Notes.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the undersigned registrant pursuant to the foregoing provisions, or otherwise,
the undersigned registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the undersigned registrant of expenses incurred or paid by a
director, officer, or controlling person of the undersigned registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the undersigned registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(b) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the calculation of Registration Fee table
in the effective registration statement; and (iii) to include any additional or
changed material information on the plan of distribution.
(c) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the undersigned registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(d) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Post-Effective Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Houston, State of Texas, on the 8th day of
January, 2001.
GOODRICH PETROLEUM CORPORATION
/s/ Robert C. Turnham, Jr.
By __________________________________
Robert C. Turnham, Jr.
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities indicated on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* President and Chief Executive January 8, 2001
____________________________________ Officer (Principal Executive
Walter G. Goodrich Officer)
* Chief Financial Officer January 8, 2001
____________________________________ (Principal Financial and
Roland L. Frautschi Accounting Officer)
* Chairman of the Board January 8, 2001
____________________________________
Henry Goodrich
* Director January 8, 2001
____________________________________
Sheldon Appel
* Director January 8, 2001
____________________________________
Jeff H. Benhard
* Director January 8, 2001
____________________________________
Donald M. Campbell
* Director January 8, 2001
____________________________________
Patrick E. Malloy, III
* Director January 8, 2001
____________________________________
Michael Y. McGovern
* Director January 8, 2001
____________________________________
Arthur A. Seeligson
* /s/ Robert C. Turnham, Jr.
____________________________________
Robert C. Turnham, Jr.
Attorney-In-Fact
</TABLE>
II-5
