10-Q 1 gdp0301.txt THIRD QUARTER FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 -------------------------------------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------------- ------------------------ Commission File Number: 1-7940 ------------------------------------------------------ Goodrich Petroleum Corporation -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 76-0466193 --------------------------------- ------------------------------------------ (State or other jurisdiction of (I.R.S. Employer ID. No.) incorporation or organization) 815 Walker, Suite 1040, Houston, Texas 77002 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (713) 780-9494 ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) None -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ X ] Yes [ ] No At November 14, 2001, there were 17,807,662 shares of Goodrich Petroleum Corporation common stock outstanding. 1 GOODRICH PETROLEUM CORPORATION FORM 10-Q September 30, 2001 INDEX Page No. PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Balance Sheets September 30, 2001 (Unaudited) and December 31, 2000.............. 3-4 Consolidated Statements of Operations (Unaudited) Nine Months Ended September 30, 2001 and 2000..................... 5 Three Months Ended September 30, 2001 and 2000.................... 6 Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2001 and 2000..................... 7 Consolidated Statements of Stockholders' Equity and Comprehensive Income (Unaudited) Nine Months Ended September 30, 2001 and 2000..................... 8 Notes to Consolidated Financial Statements........................... 9-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 12-16 Item 3. Quantitative and Qualitative Disclosure about Market Risk 16-17 PART II - OTHER INFORMATION 18 Item 2. Changes in Securities and Use of Proceeds. Item 6. Exhibits and Reports on Form 8-K 2 GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets
September 30, December 31, 2001 2000 ------------- ------------ (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents.......................... $ 127,402 3,531,763 Accounts receivable Trade and other, net of allowance................ 928,176 241,659 Accrued oil and gas revenue...................... 4,225,939 4,553,863 Fair value of oil and gas derivatives............ 502,699 --- Prepaid insurance.................................. 111,640 238,647 ----------- ----------- Total current assets.......................... 5,895,856 8,565,932 ----------- ----------- PROPERTY AND EQUIPMENT Oil and gas properties (successful efforts method). 103,777,721 79,252,980 Furniture, fixtures and equipment.................. 304,010 240,150 ----------- ----------- 104,081,731 79,493,130 Less accumulated depletion, depreciation and amortization............................... (31,405,498) (26,044,257) ----------- ----------- Net property and equipment....................... 72,676,233 53,448,873 ----------- ----------- OTHER ASSETS Restricted cash.................................... 2,495,000 1,240,000 Deferred taxes..................................... --- 1,694,675 Other.............................................. 60,310 394,114 ----------- ----------- Total other assets............................ 2,555,310 3,328,789 ----------- ----------- TOTAL ASSETS............................. $ 81,127,399 65,343,594 =========== ===========
See notes to consolidated financial statements. 3 GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Continued)
September 30, December 31, 2001 2000 ------------- ------------ (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable.................................. $ 3,854,238 $ 3,043,477 Accrued liabilities............................... 1,864,453 1,231,965 Current portion other non-current liabilities..... 124,875 820,454 ----------- ------------ Total current liabilities............... 5,843,566 5,095,896 ----------- ------------ LONG TERM DEBT...................................... 19,000,000 22,965,000 OTHER NON-CURRENT LIABILITIES Production payment payable........................ 1,385,687 969,870 Accrued abandonment costs......................... 4,129,741 3,707,612 Deferred Taxes.................................... 831,294 --- STOCKHOLDERS' EQUITY Preferred stock; authorized 10,000,000 shares: Series A convertible preferred stock, par value per share; issued and outstanding 791,968 and 791,968 shares (liquidation preference $10 per share, aggregating to $7,919,680)............ 791,968 791,968 Series B convertible preferred stock, par value per share; issued and outstanding 0 and 660,839 shares............................ --- 660,839 Common stock; par value $0.20 per share: Authorized 50,000,000 shares; issued and outstanding 17,773,060 and 13,318,920 shares.. 3,554,612 2,663,784 Additional paid-in capital...................... 52,303,990 39,348,013 Accumulated deficit............................. (7,040,213) (10,859,388) Accumulated other comprehensive income.......... 326,754 --- ----------- ----------- Total stockholders' equity........... 49,937,111 32,605,216 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..... $ 81,127,399 $ 65,343,594 =========== ===========
See notes to consolidated financial statements. 4 GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)
Nine Months Ended September 30, 2001 2000 ---------- ----------- REVENUES Oil and gas sales..................................$ 24,029,405 19,656,078 Other.............................................. 154,208 382,229 ---------- ----------- Total revenues................................ 24,183,613 20,038,307 ---------- ----------- EXPENSES Lease operating expense............................ 4,733,427 3,416,725 Production taxes................................... 1,457,000 1,584,138 Depletion, depreciation and amortization........... 5,038,843 4,227,460 Exploration........................................ 3,253,732 2,084,469 Interest expense................................... 918,809 3,696,048 General and administrative......................... 2,252,700 1,711,525 Preferred dividend requirements of a subsidiary.... --- 38,364 ---------- ----------- Total costs and expenses...................... 17,654,511 16,758,729 ---------- ----------- GAIN ON SALE OF ASSETS................................ 71,986 307,299 ---------- ----------- INCOME BEFORE INCOME TAXES............................ 6,601,088 3,586,877 Income taxes....................................... (2,310,381) 1,655,032 ---------- ----------- NET INCOME............................................ 4,290,707 5,241,909 Preferred stock dividends.......................... 2,848,073 886,685 ---------- ----------- NET INCOME APPLICABLE TO COMMON STOCK................. 1,442,634 4,355,224 ========== =========== BASIC INCOME PER AVERAGE COMMON SHARE................. .08 .49 ========== =========== DILUTED INCOME PER AVERAGE COMMON SHARE............... .07 .35 ========== =========== AVERAGE COMMON SHARES OUTSTANDING - BASIC............. 17,167,718 8,873,159 ========== =========== AVERAGE COMMON SHARES OUTSTANDING - DILUTED........... 20,099,393 15,050,900 ========== ===========
See notes to consolidated financial statements. 5 GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)
Three Months Ended September 30, 2001 2000 ------------- ---------- REVENUES Oil and gas sales..............................$ 7,678,211 8,590,027 Other ........................................ 70,241 96,349 ---------- ----------- Total revenues............................ 7,748,452 8,686,376 ---------- ----------- EXPENSES Lease operating expense........................ 1,655,790 1,305,170 Production taxes............................... 442,285 651,126 Depletion, depreciation and amortization....... 1,881,258 1,659,354 Exploration.................................... 537,276 1,358,282 Interest expense............................... 321,571 1,304,055 General and administrative..................... 811,899 514,268 ---------- ----------- Total costs and expenses.................. 5,650,079 6,792,255 ---------- ----------- GAIN ON SALE OF ASSETS............................ --- 33,475 ---------- ----------- INCOME BEFORE INCOME TAXES........................ 2,098,373 1,927,596 Income taxes................................... (734,432) 1,655,032 ---------- ----------- NET INCOME....................................... 1,363,941 3,582,628 Preferred stock dividends...................... 154,798 295,562 ---------- ----------- NET INCOME APPLICABLE TO COMMON STOCK............. 1,209,143 3,287,066 ========== =========== BASIC INCOME PER AVERAGE COMMON SHARE............. .07 .31 ========== =========== DILUTED INCOME PER AVERAGE COMMON SHARE........... .06 .23 ========== =========== AVERAGE COMMON SHARES OUTSTANDING - BASIC......... 17,763,136 10,644,423 ========== =========== AVERAGE COMMON SHARES OUTSTANDING - DILUTED....... 20,610,805 15,505,616 ========== ===========
See notes to consolidated financial statements. 6 GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2001 2000 ---------- ---------- OPERATING ACTIVITIES Net income.........................................$ 4,290,707 $ 5,241,909 Adjustments to reconcile net income to cash provided by operating activities: Depletion, depreciation and amortization......... 5,038,843 4,227,460 Deferred income taxes............................ 2,310,381 (1,655,032) Amortization of leasehold costs.................. 769,402 762,914 Amortization of production payment discount...... 92,931 177,999 Amortization of deferred debt financing.......... 39,750 300,292 Accrued interest on private placement borrowings. --- 973,631 Amortization of detachable stock purchase warrants.................................... --- 357,016 Preferred dividends of subsidiary................ --- 38,364 Gain on sale of assets........................... (71,986) (307,299) Capital expenditures charged to income........... 1,566,736 954,640 Other............................................ 20,745 30,000 Net change in: Accounts receivable.............................. (358,593) (3,296,961) Prepaid insurance and other...................... 99,452 (107,103) Accounts payable................................. 810,761 2,321,635 Accrued liabilities.............................. 252,488 (55,133) Other liabilities................................ --- (484,525) ----------- ----------- Net cash provided by operating activities... 14,861,617 9,479,807 ----------- ----------- INVESTING ACTIVITIES Proceeds from sale of assets....................... 451,986 459,526 Acquisition of oil and gas properties.............. --- (1,198,631) Capital expenditures............................... (26,155,337) (10,783,174) ----------- ----------- Net cash used in investing activities....... (25,703,351) (11,522,279) ----------- ----------- FINANCING ACTIVITIES Proceeds from public offering of common stock...... 15,000,000 4,500,000 Principal payments of bank borrowings.............. (13,690,000) (3,225,617) Proceeds from bank borrowings...................... 9,725,000 --- Payment of debt and equity financing costs......... (1,695,323) (30,000) Exercise of stock purchase warrants................ 210,233 249,322 Exercise of stock options.......................... 11,563 201,319 Net change in restricted cash...................... (1,255,000) (1,030,000) Production payments................................ (397,568) (452,733) Preferred stock dividends.......................... (471,532) (2,068,652) ----------- ----------- Net cash provided by financing activities... 7,437,373 (1,856,361) ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS............. (3,404,361) (3,898,833) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...... 3,531,763 5,929,833 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD............$ 127,402 $ 2,030,396 =========== ===========
See notes to consolidated financial statements. 7 GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity and Comprehensive Income Nine Months Ended September 30, 2001 and 2000 (Unaudited)
Series A Series B Preferred Stock Preferred Stock Common Stock --------------- --------------- ------------ Balance at December 31, 1999.............. 796,318 $ 796,318 665,759 $ 665,759 5,417,171 $ 1,083,434 Net Income................................ --- --- --- --- --- --- Total Comprehensive Income................ --- --- --- --- --- --- Issuance of Common Stock.................. --- --- --- --- 1,533,333 306,667 Conversion of Preferred Stock of Subsidiary .............................. --- --- --- --- 1,547,665 309,533 Exercise of Director Stock Option......... --- --- --- --- 12,500 2,500 Conversion of Notes Payable and Issuance of Common Stock in Connection therewith.. --- --- --- --- 3,295,647 --- Preferred Stock Dividends................. --- --- --- --- --- --- Exercise of Common Stock Purchase Warrants --- --- --- --- 252,022 44,002 Exercise of Employee Stock Option......... --- --- --- --- 245,698 49,140 Director Stock Grants..................... --- --- --- --- 6,000 1,200 Conversion of Series B Preferred Stock to Common Stock.......................... --- --- (4,920) (4,920) 5,486 682 ------- -------- -------- ------- ---------- --------- Balance at September 30, 2000............. 796,318 $ 796,318 660,839 $ 660,839 12,315,522 $ 2,463,104 ======= ======== ======== ======= ========== ========= Balance at December 31, 2000.............. 791,968 791,968 660,839 660,839 13,318,920 2,663,784 Net Income................................ --- --- --- --- --- --- Other Comprehensive Income (Loss); Net of Tax Cumulative Effect of Accounting Change.... --- --- --- --- --- --- Net Derivative Gain....................... --- --- --- --- --- --- Reclassification Adjustment............... --- --- --- --- --- --- Total Comprehensive Income................ --- --- --- --- --- --- Issuance of Common Stock.................. --- --- --- --- 3,000,000 600,000 Conversion of Series B Preferred Stock to Common Stock............................. --- --- (660,839) (660,839) 1,189,510 237,902 Preferred Stock Dividends................. --- --- --- --- --- --- Director Stock Grant...................... --- --- --- --- 5,130 1,026 Exercise of Stock Warrants................ --- --- --- --- 252,000 50,400 Exercise of Stock Options................. --- --- --- --- 7,500 1,500 ------- -------- -------- ------- ---------- --------- Balance at September 30, 2001............. 791,968 $ 791,968 --- $ --- 17,773,060 $ 3,554,612 ======= ======== ======== ======= ========== =========
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity and Comprehensive Income Nine Months Ended September 30, 2001 and 2000 (Unaudited)
Accumulated Additional Other Total Paid-In Accumulated Comprehensive Stockholders' Capital Deficit Income Equity ------- ------- ------- ------ Balance at December 31, 1999.............. $ 18,156,114 $(14,290,581) $ --- $ 6,411,044 Net Income................................ --- 5,241,909 --- 5,241,909 Total Comprehensive Income................ --- --- --- 5,241,909 Issuance of Common Stock.................. 4,193,333 --- --- 4,500,000 Conversion of Preferred Stock of Subsidiary.............................. 2,411,956 --- --- 2,721,489 Exercise of Director Stock Option......... 7,375 --- --- 9,875 Conversion of Notes Payable and Issuance of Common Stock in Connection therewith.. --- --- --- 10,410,849 Preferred Stock Dividends................. --- (2,068,652) --- (2,068,652) Exercise of Common Stock Purchase Warrants 173,509 --- --- 249,322 Exercise of Employee Stock Option......... 142,304 --- --- 191,444 Director Stock Grants..................... 28,800 --- --- 30,000 Conversion of Series B Preferred Stock to Common Stock.......................... 2,377 --- --- --- ---------- ----------- ---------- ---------- Balance at September 30, 2000............. $ 34,894,343 $(11,117,324) $ --- $ 27,697,280 ========== =========== ========== ========== Balance at December 31, 2000.............. 39,348,013 (10,859,388) --- 32,605,216 Net Income................................ --- 4,290,707 --- 4,290,707 Other Comprehensive Income (Loss); Net of Tax Cumulative Effect of Accounting Change.... --- --- (2,535,469) (2,535,469) Net Derivative Gain....................... --- --- 2,041,626 2,041,626 Reclassification Adjustment............... --- --- 820,597 820,597 Total Comprehensive Income................ --- --- --- 4,617,461 Issuance of Common Stock.................. 12,469,170 --- --- 13,069,170 Conversion of Series B Preferred Stock to Common Stock............................. 317,937 --- --- (105,000) Preferred Stock Dividends................. --- (471,532) --- (471,532) Director Stock Grant...................... 28,974 --- --- 30,000 Exercise of Stock Warrants................ 129,833 --- --- 180,233 Exercise of Stock Options................. 10,063 --- --- 11,563 ---------- ---------- ---------- ---------- Balance at September 30, 2001............. $ 52,303,990 $ (7,040,213) $ 326,754 $49,937,111 =========== =========== ========== ==========
See notes to consolidated financial statements. 8 GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 2000 and 1999 (Unaudited) NOTE A - Basis of Presentation ------------------------------ Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission; however, the Company believes the disclosures which are made are adequate to make the information presented not misleading. The financial statements and footnotes included in this Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2000. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of September 30, 2001 and the results of its operations for the three and nine months ended September 30, 2001 and 2000. The results of operations for the three and nine months period ended September 30, 2001 are not necessarily indicative of the results to be expected for the full year. NOTE B - New Accounting Pronouncements -------------------------------------- On January 1, 2001, the Company adopted Statement of Financial Accounting Standard No. 133 (subsequently amended by Financial Accounting Standard No. 138), Accounting for Derivative Instruments and Hedging Activities ("FAS 133"). This statement requires all derivatives to be recognized on the balance sheet and measured at fair value. All such instruments have been designated by the Company as hedges of forecasted cash flow exposures. Changes in the fair value of qualifying cash flow hedging derivatives are deferred and recorded as a component of Accumulated Other Comprehensive Income (AOCI) in the Consolidated Balance Sheet until the forecasted transaction occurs, at which time the derivative's fair value will be recognized in earnings. The ineffective portion of a derivative's change in fair value is required to be immediately recognized in earnings. Adoption of SFAS Nos. 133/138 resulted in a transition adjustment loss to AOCI of $2.5 million, net of $1.4 million in income tax benefit, as of January 1, 2001 for the cumulative effect on prior years; there was no cumulative effect on earnings upon adoption. Excluding the transition adjustment, the effect of this accounting change increased AOCI for the nine months ended September 30, 2001 by $2,862,000, net of $1,541,000 in income taxes, and had no impact on income for the same period. The deferred hedging gain included in AOCI will be 9 transferred to earnings as the forecasted transactions actually occur. The $340,000 balance in AOCI, is anticipated to be transferred into earnings over the next five months. NOTE C - Public Offering ------------------------ On February 1, 2001, the Company completed a public offering of 3,000,000 shares of its common stock at $5.00 per share resulting in net proceeds of approximately $13.1 million to the Company. The Company used the proceeds from the offering along with other available funds to reduce outstanding debt under its credit facility by approximately $13.7 million. Transaction costs paid in 2000 totaling $303,000 were accounted for as deferred costs at December 31, 2000. NOTE D - Exchange of Series B Preferred Stock --------------------------------------------- Prior to the public offering, the Company reached an agreement with all of the holders of its Series B preferred stock to exchange each share of Series B for 1.8 shares of its common stock. Concurrent with the closing of the public offering, the Company exchanged all 660,839 shares of its Series B preferred stock into 1,189,510 shares of common stock. In connection with the conversion of the Series B preferred stock, a conversion premium in the amount of $2,377,000 was recorded to reflect the excess of the 1.8 conversion factor over the terms of the original preferred stock issuance. This one-time, non-cash charge is reflected as a preferred stock dividend to arrive at net income applicable to common stock and will not have an affect on total stockholders equity. Transaction costs of $105,000 accounted for as deferred costs at December 31, 2000 were netted against additional paid-in capital at the date of conversion. NOTE E - Net Income Per Share ----------------------------- Net income was used as the numerator in computing both basic and diluted income per common share for the three and nine months ended September 30, 2001 and 2000. The following table reconciles the weighted-average shares outstanding used for these computations. Three months Nine months ended September 30, ended September 30, ------------------- ------------------- 2000 2001 2000 2001 ---- ---- ---- ---- Basic Method............. 10,644,423 17,763,136 8,873,159 17,167,718 Dilutive Stock Warrants.. 2,744,955 2,728,026 2,757,535 2,760,321 Dilutive Stock Options... 396,770 119,643 653,787 171,354 ----------- ---------- ---------- ---------- Diluted Method........... 13,786,148 20,610,805 12,284,481 20,099,393 =========== ========== =========== ========== The computation of earnings per share in the consolidated Statement of Income did not consider convertible preferred stock convertible into 330,000 shares of common stock for the three and nine months ended September 30, 2001 because the effects of the securities would have been antidilutive. 10 NOTE F - Commitments and Contingencies -------------------------------------- The U.S. Environmental Protection Agency ("EPA") has identified the Company as a potentially responsible party ("PRP") for the cost of clean-up of "hazardous substances" at an oil field waste disposal site in Vermilion Parish, Louisiana. The Company has estimated that the remaining cost of long-term clean-up of the site will be approximately $4.5 million with the Company's percentage of responsibility to be approximately 3.05%. As of September 30, 2001, the Company has paid approximately $321,000 in costs related to this matter and $123,000 has been accrued for the remaining liability. These costs have not been discounted to their present value. The EPA and the PRPs will continue to evaluate the site and revise estimates for the long-term clean-up of the site. There can be no assurance that the cost of clean-up and the Company's percentage responsibility will not be higher than currently estimated. In addition, under the federal environmental laws, the liability costs for the clean-up of the site is joint and several among all PRPs. Therefore, the ultimate cost of the clean-up to the Company could be significantly higher than the amount presently estimated or accrued for this liability. NOTE G - Income Taxes --------------------- The Company recorded a net deferred tax asset of approximately $1.6 million in the three months ended September 30, 2000 based on projections for generating sufficient taxable income prior to expiration of net operating loss carryforwards. Although realization is not assured, management believes it is more likely than not that the recorded deferred tax asset, net of valuation allowance provided, will be realized. NOTE H - Credit Facility ------------------------ On November 9, 2001 the Company established a new credit facility with BNP Paribas Bank, with a borrowing base of $25,000,000. The new borrowing base will remain effective until the next borrowing base redetermination scheduled to be made on or before March 31, 2002. Interest on the credit facility will accrue at a rate calculated at the option of the Company as either the BNP Paribas Bank base rate plus 0.00% to 0.50%, or LIBOR plus 1.50% - 2.50% depending on borrowing base utilization. Interest or LIBOR-Rate is due and payable on the last day of its respective Interest Period. Accrued interest on each Base-Rate borrowing is due and payable on the last day of each quarter. The credit facility will mature on November 9, 2004. The credit facility requires that the Company pay a 0.375% per annum commitment fee each quarter based on the Company's borrowing base utilization. Prior to maturity, no payments are required so long as the maximum borrowing base amount exceeds the amounts outstanding under the credit facility. The credit facility requires the Company to monitor tangible net worth and maintain certain financial statement ratios at certain levels. Substantially all the Company's assets are pledged to secure the credit facility. 11 Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------------- Nine months ended September 30, 2001 versus nine months ended September 30, 2000 Total revenues for the nine months ended September 30, 2001 amounted to $24,184,000 and were $4,145,000 higher than the $20,038,000 for the nine months ended September 30, 2000 due to higher oil and gas sales. Oil and gas sales were $24,029,000 for the first nine months of 2001 compared to $19,656,000 for the first nine months of 2000, or $4,373,000 higher due to increased production volumes and higher oil and gas prices. Oil and gas sales decreased by $1,256,000 in the nine months ended September 30, 2001 compared to a reduction of $1,763,000 in the prior period as a result of settlement of the Company's outstanding futures contracts. The following table reflects the production volumes and pricing information for the periods presented.
Nine months Nine months ended September 30, 2001 ended September 30, 2000 ------------------------ ------------------------ Production Average Price Production Average Price Gas (Mcf)....... 2,785,221 $ 4.55 2,453,378 $ 3.57 Oil (Bbls)...... 436,088 26.07 435,607 25.02
Lease operating expense was $4,733,000 for the nine months ended September 30, 2001, versus $3,417,000 for the nine months ended September 30, 2000, or $1,316,000 higher due primarily to a full nine months of costs at Burrwood/West Delta 83 field in the current period compared to seven months in the prior period. Production taxes amounted to $1,457,000 for the nine months ended September 30, 2001 compared to $1,584,000 or $127,000 lower due to higher oil and gas sales more than offset by severance tax exemptions received on certain production in the Burrwood/West Delta 83 field. Depletion, depreciation and amortization was $5,039,000 for the nine months ended September 30, 2001, versus $4,227,000 for the nine months ended September 30, 2000, or $812,000 higher due to increased capitalized costs and higher production volumes in the nine months ended 2001 versus 2000. Exploration expense for the nine months ended September 30, 2001 was $3,254,000 versus $2,084,000 for the same period of 2000 or $1,170,000 higher due primarily to dry hole and seismic costs of $1,567,000, and $532,000, respectively, in the current period versus $-0- and $796,000 for the same period in 2000. Interest expense was $919,000 in the nine months ended September 30, 2001 compared to $3,696,000 in the nine months ended September 30, 2000, or $2,777,000 lower due to higher average debt outstanding for the nine months ended September 30, 2000. The 2000 amount includes non-cash expenses associated with the amortization of financing costs and detachable common stock purchase warrants issued in connection with the September 1999 private placement of $226,000 and $285,000. 12 General and administrative expenses amounted to $2,253,000 in the nine months ended September 30, 2001 versus $1,711,000 in the nine months ended September 30, 2000. The Company recorded a gain on the sale of certain non-core oil and gas properties of $72,000 for the nine months ended September 30, 2001. Three months ended September 30, 2001 versus three months ended September 30, 2000 Total revenues for the three months ended September 30, 2001 amounted to $7,748,000 and were $938,000 lower than the $8,686,000 for the three months ended September 30, 2000 due to lower oil and gas sales. Oil and gas sales were $7,678,000 for the quarter ended September 30, 2001 compared to $8,590,000 for the quarter ended September 30, 2000 or $912,000 lower due to lower oil and gas prices and lower oil production partially offset by higher gas production in the current period. Oil and gas sales were increased by $198,000 in the three months ended September 30, 2000 versus a reduction of $725,000 in the same period in 2000 as a result of settlement of the Company's outstanding futures contracts. The following table reflects the production volumes and pricing information for the periods presented.
Three months Three months ended September 30, 2001 ended September 30, 2000 ------------------------ ------------------------ Production Average Price Production Average Price Gas (Mcf)......... 1,088,781 $ 3.17 964,317 $ 4.17 Oil (Bbls)........ 166,087 25.44 173,582 26.33
Lease operating expense was $1,656,000 for the three months ended September 30, 2001, versus $1,305,000 for the three months ended September 30, 2000, or $351,000 higher due primarily to more producing wells in the 2001 period compared to the same period in 2000. Production taxes were $442,000 for the three months ended September 30, 2001 compared to $651,000 for the three months ended September 30, 2000 or $209,000 lower due to lower oil and gas sales and receipt of severance tax exemption on certain production in the Burrwood/West Delta 83 fields. Depletion, depreciation and amortization was $1,881,000 for the three months ended September 30, 2001, versus $1,659,000 for the three months ended September 30, 2000, or $222,000 higher due to increased capitalized costs and higher production volumes in the current period compared to the prior period. The Company incurred $537,000 of exploration expense in the third quarter of 2001, compared to $1,358,000 in the third quarter of 2000, or $821,000 lower primarily due to seismic costs of $66,000 in the third quarter of 2001 versus $792,000 in 2000. Additionally, dry hole costs amounted to $24,000 in the third quarter of 2001 compared to $158,000 for the same period in 2000. Interest expense was $322,000 in the three months ended September 30, 2001 compared to $1,304,000 in the third quarter of 2000, or $982,000 lower due to higher average debt outstanding and a higher effective interest rate in the 2000 13 period. Also, the 2000 amount includes $203,000 in non-cash expenses associated with the amortization of financing costs and detachable common stock purchase warrants issued in connection with the September 1999 private placement and amortization of the discount associated with the production payment liability recorded in connection with the Lafitte Field acquisition. General and administrative expenses amounted to $812,000 in the three months ended September 30, 2001 versus $514,000 in the third quarter of 2000. Liquidity and Capital Resources ------------------------------- Net cash provided by operating activities was $14,862,000 in the nine months ended September 30, 2001 compared to net cash provided by operating activities of $9,480,000 in the nine months ended September 30, 2000. The Company's accompanying consolidated statements of cash flows identify major differences between net income and net cash provided by operating activities for each of the periods presented. Net cash used in investing activities totaled $25,703,000 for the nine months ended September 30, 2001 compared to $11,522,000 in 2000. The nine months ended September 30, 2001 reflects capital expenditures totaling $26,155,000 and proceeds from the sale of oil and gas properties of $452,000. The nine months ended September 30, 2000 reflects capital expenditures totaling $10,783,000, cash paid in connection with the acquisition of oil and gas properties of $1,199,000, and proceeds from the sales of oil and gas properties of $460,000. Net cash provided by financing activities was $7,437,000 for the nine months ended September 30, 2001 as compared to net cash used in financing activities of $1,856,000 in the prior year period. The 2001 amounts consist of proceeds from the issuance of common stock of $15,000,000 and pay downs by the Company under its line of credit of $13,690,000. The 2001 amounts also includes proceeds from bank borrowings of $9,725,000, the payment of debt financing and public offering costs of $1,695,000, changes in restricted cash of $1,255,000, and production payments of $398,000. In addition, the 2001 amount includes preferred stock dividends of $472,000 and proceeds from the exercise of stock warrants and employee stock options of $210,000 and $12,000, respectively. The 2000 amount includes proceeds from the issuance of common stock of $4,500,000 and paydowns by the Company under its line of credit of $3,226,000. The 2000 amount includes changes in restricted cash of $1,030,000, proceeds from the exercise of stock purchase warrants of $249,000 and the exercise of employee stock options of $201,000. The 2000 amount also includes preferred stock dividends of $2,069,000, production payments of $453,000 and payment of debt financing costs of $30,000. Compass Credit Facility ----------------------- On November 9, 2001 the Company established a new credit facility with BNP Paribas Bank, with a borrowing base of $25,000,000. The new borrowing base will remain effective until the next borrowing base redetermination scheduled to be 14 made on or before March 31, 2002. Interest on the credit facility will accrue at a rate calculated at the option of the Company as either the BNP Paribas Bank base rate plus 0.00% to 0.50%, or LIBOR plus 1.50% - 2.50% depending on borrowing base utilization. Interest on LIBOR-Rate loans is due and payable on the last day of its respective Interest Period. Interest on each Base-Rate borrowing is due and payable on the last day of each quarter. The credit facility will mature on November 9, 2004. The credit facility requires that the Company pay a 0.375% per annum commitment fee each quarter based on the Company's borrowing base utilization. Prior to maturity, no payments are required so long as the maximum borrowing base amount exceeds the amounts outstanding under the credit facility. The credit facility requires the Company to monitor tangible net worth and maintain certain financial statement ratios at certain levels. Substantially all the Company's assets are pledged to secure the credit facility. The Company had $26,155,000 in capital expenditures in the nine months ended September 30, 2001. The Company's budget for 2001 capital expenditures was set at the beginning of the year at $20,000,000, and has since been updated to $26,000,000. Such budget is under constant review during the year and could change due to actual and estimated cash flow, commodity prices, business opportunities and other factors. The Company expects to fund capital expenditures for the remainder of 2001 from operating cash flow, cash and bank borrowings, if necessary. Stock Listing ------------- The Company has been notified by the New York Stock Exchange ("NYSE") that it has been removed from the NYSE's "Watch List" under the Exchange's continued listing and compliance standards and is now considered a "company in good standing" as the NYSE rule filing No. SR-NYSE-2001-02 was approved by the Securities and Exchange Commission on June 27, 2001. The Company will be subject to the NYSE's normal continued listing requirements and its monitoring process. New Accounting Pronouncement ---------------------------- Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS No. 141") and Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142") were issued in July 2001. SFAS No. 141 requires that all business combinations be accounted for under the purchase method of accounting and that certain acquired intangible assets in a business combination be recognized and reported as assets apart from goodwill. SFAS No. 142 requires that amortization of goodwill be replaced with periodic tests of the goodwill's impairment at least annually in accordance with the provisions of SFAS No. 142 and that intangible assets other than goodwill be amortized over their useful lives. The Company will adopt SFAS No. 141 immediately and SFAS No. 142 in the first quarter 2002. The adoption of SFAS No. 141 and 142 are not expected to have a significant impact on the Company's financial statements. 15 In addition, Statement of Financial Accounting Standard No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143") has been approved for issuance. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The statement is effective for fiscal years beginning after June 15, 2001. The Company has not yet determined what, if any, impact the adoption of this statement may have on its financial statements. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- Debt and debt-related derivatives --------------------------------- The Company is exposed to interest rate risk on its long-term debt with variable interest rates. Based on the overall interest rate exposure on variable rate debt at September 30, 2001 a hypothetical 2% change in the interest rates would increase interest expense by approximately $90,000. Hedging Activity ---------------- The Company engages in future contracts ("Agreements") with some of its production. The Company enters into hedging activities in order to secure an acceptable future price relating to a portion of future production. The primary objective of the activities is to protect against decreases in price during the term of the hedge. See Note B to the Company's Consolidated Financial Statements for a discussion of activities involving derivative financial instruments during the third quarter of 2001. At September 30, 2001, the Company's open forward position on its outstanding crude oil was as follows: (a) 500 barrels of oil per day with a no cost "collar" of $20.00 and $28.40 per barrel through December 2001; (b) 300 barrels of oil per day with a no cost "collar" of $23.00 and $29.55 per barrel through December 2001; (c) 500 barrels of oil per day "swap" at $29.00 per barrel through December 2001; (d) 300 barrels of oil per day "put" at $25.38 per barrel for January 2002; and (e) 300 barrels of oil per day "put" at $25.15 per barrel for February 2002 The fair value of the crude oil hedging contracts in place at September 30, 2001 resulted in an asset of $279,000. A 10% increase in the average NYMEX price of crude oil would have resulted in an asset of $134,000 and would have decreased the asset by $145,000. At September 30, 2001, the Company had a natural gas hedging contract in place for 5,000 Mmbtu per day with a no cost collar of $3.05 and $4.45 per Mmbtu through December 31, 2001. The fair value of the natural gas hedging contract in place at September 30, 2001 resulted in an asset of $224,000. A 10% increase in the average NYMEX price of natural gas would have resulted in an asset of $106,000 and would have decreased the asset by $118,000. 16 Price fluctuations and the volatile nature of markets ----------------------------------------------------- Despite the measures taken by the Company to attempt to control price risk, the Company remains subject to price fluctuations for natural gas and oil sold in the spot market. Prices received for natural gas sold on the spot market are volatile due primarily to seasonality of demand and other factors beyond the Company's control. Domestic oil and gas prices could have a material adverse effect on the Company's financial position, results of operations and quantities of reserves recoverable on an economic basis. Disclosure Regarding Forward-Looking Statement ---------------------------------------------- Certain statements in this quarterly report on Form 10-Q regarding future expectations and plans for future activities may be regarded as "forward looking statements" within the meaning of Private Securities Litigation Reform Act of 1995. They are subject to various risks, such as financial market conditions, operating hazards, drilling risks and the inherent uncertainties in interpreting engineering data relating to underground accumulations of oil and gas, as well as other risks discussed in detail in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. 17 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds. Information required by this item is hereby incorporated by reference to the Company's Form 8-K filed October 15, 1999. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GOODRICH PETROLEUM CORPORATION (registrant) /s/ Walter G. Goodrich ----------------------------------- ----------------------------------- Date Walter G. Goodrich, President and Chief Executive Officer /s/ Roland L. Frautschi ----------------------------------- ----------------------------------- Date Roland L. Frautschi, Senior Vice President, Chief Financial Officer and Treasurer 19