Goodrich Petroleum Announces a 4.5% Increase in Year-end Reserves to 421 Bcfe

HOUSTON, Feb. 17 /PRNewswire-FirstCall/ -- Goodrich Petroleum Corporation (NYSE: GDP) today announced that its proved oil and natural gas reserves as of December 31, 2009 increased by 4.5% to 420.6 billion cubic feet equivalent ("Bcfe") of natural gas versus the prior year period.  Year-end proved reserves were 99% natural gas and 39% developed.  The present value, using a 10% discount rate, of the future net cash flows before income taxes of the proved reserves (the "PV-10 Value") was approximately $148.2 million, using average first day-of-the-month 2009 prices of $3.87 per MMBtu for natural gas and $61.18 per barrel for oil.  Under the previous SEC pricing guidelines, the same year-end proved reserves would have been 460.0 Bcfe, with a PV-10 Value of approximately $550.0 million using year-end prices of $5.79 per MMBtu of gas and $79.39 per barrel of oil.  The PV-10 Value is different from the standardized measure of discounted estimated future cash flows, in that the latter measure is calculated after a reduction for the discounted value of estimated future income taxes.

The Company had proved reserve additions of 314.3 Bcfe before revisions, based on drilling and completion capital expenditures of $215.0 million, for an organic finding and development cost of $0.68 per Mcfe.  When including approximately 259.6 Bcfe of negative revisions due to lower prices used in the year-end 2009 reserve report, organic finding and development cost was $3.93 per Mcfe.  Proved developed reserve additions were 67.1 Bcfe before revisions, with a proved developed organic finding and development cost of $3.21 per Mcfe.  When factoring in approximately 22.3 Bcfe of negative price-related revisions to proved developed reserves, organic finding and development cost was $4.81 per Mcfe.  See the table below for more information on the calculation of organic finding and development costs.    

The Company's successful Haynesville Shale drilling program was the primary driver of the growth in production and proved reserves in 2009.  Reserve additions were driven by the booking of 180.1 Bcfe of proved reserves associated with the Haynesville Shale, at an average gross estimated ultimate recovery ("EUR") per horizontal well of approximately 6.5 Bcfe of proved reserves (includes reserves booked for both East Texas and Northern Louisiana), and 117.9 Bcfe of Cotton Valley horizontals, at an average gross EUR of 5.5 Bcfe of proved reserves per well.  These additions were offset in part by total downward revisions of 266.3 Bcfe, which were primarily attributable to the lower average 2009 natural gas price used to determine the proved reserves and the elimination of all vertically drilled proved undeveloped reserves, as the Company has made a strategic decision to concentrate solely on horizontal drilling at this time.  

The proved reserves as of December 31, 2009 were fully engineered by Netherland, Sewell and Associates, Inc. ("NSA") and were calculated based on new U.S. Securities and Exchange Commission ("SEC") rules that went into effect for the Company's year end 2009 oil and gas reserve reporting.  The revisions to the rules were intended to modernize and update the rules to align them with current practices and changes in technology.  In addition to changing the price used to determine proved reserves to a simple average of the first-day-of-the-month price for each of the twelve calendar months, other changes pertinent to our proved reserves at year end included the limitation on the inclusion of most proved undeveloped reserves to those reserves that are scheduled to be developed within five years.

Although the new SEC rules provide for the booking of PUD reserves using reliable technologies, which if fully implemented would have resulted in additional undeveloped reserves being classified as proved, our PUD reserves at year end 2009 were included under a plan which calls for approximately 35% of the Company's annual budget over each of the next five years, based on the Company's current annual budget of $255.0 million, to be earmarked for PUD development.  This leaves sufficient capital to be allocated to the continued development of reserves in the non-proven portion of our resource base, as well as new ventures in the future.

The following is a comparison of year end reserves using current SEC pricing guidelines and previous SEC pricing guidelines:

    
    
    
                                               Current          Previous
                                             SEC Prices        SEC Prices
                                             ----------        ----------
    Base Price ($/MMBtu)                        $3.87             $5.79
                                                        
    Proved Reserves (Bcfe)                      420.6             460.0
    PV-10 ($MM's)                              $148.2            $550.0
                                                        

The following table reflects the changes in the proved reserve and proved developed reserve estimates since the end of 2008, using the new SEC price guidelines:

    
    
    
                                                                 Proved 
                                                Proved          Developed
                                               Reserves          Reserves
                                                (Bcfe)            (Bcfe)
                                               ---------        --------- 
    Reserves at December 31, 2008                 402.3            152.5
      Production                                  (29.8)           (29.8)
      Reserve Additions                           314.3             67.1
      Revisions – Price                          (259.6)           (22.3)
      Revisions – Technical                        (6.6)            (2.0)
                                                    ---              ---  
    Reserves at December 31, 2009                 420.6            165.5
    
    2009 Reserve Replacement Ratio (%) (a)        1,055%             225%
    2009 Net Drilling and Completion Capital
      Expenditure                                                 $215.0
     (millions of dollars, see 
      reconciliation below)
    2009 Organic Finding and Development
     Costs ($/Mcfe) (b)                                            $0.68
    2009 Organic Proved Developed
     Finding & Development Costs ($/Mcfe) (c)                      $3.21
    
    (a) Reserve Replacement Ratio is calculated by dividing Reserve Additions
        (before price and technical revisions) by Production
    (b) Organic Finding and Development Costs per Mcfe is calculated by 
        dividing Net Drilling and Completion Capital Expenditures by Reserve 
        Additions (before pricing and technical revisions) 
    (c) Organic Proved Developed Finding and Development Costs per Mcfe is 
        calculated by dividing Net Drilling and Completion Capital 
        Expenditures by Proved Developed Reserve Additions (before price 
        and technical revisions)

PRODUCTION

Production for the fourth quarter increased by 4.5% sequentially and 21% over the prior year period to 7.92 billion cubic feet equivalent, or an average of 86,100 Mcfe per day.  Production from the Haynesville Shale comprised 44% of the total volumes produced.

Production for the first quarter of 2010 is expected to range from 88,000 Mcfe per day to 91,000 Mcfe per day, and the Company expects year over year production volume growth for 2010 of 15 to 25%.

CAPITAL EXPENDITURES

The company also announced that its board of directors has recently increased the preliminary 2010 Capital Expenditure budget by approximately 10%, to $255.0 million.

    
    
    Quantitative Reconciliation of Net Drilling and Completion Capital 
    Expenditures (non-GAAP) as used in the calculation of Organic Finding and
    Development Costs and Organic Proved Developed Finding and Development 
    Costs to Net Cash Used in Investing Activities (GAAP).
    
    Net Cash Used in Investing Activities (GAAP)                 $265,587
    Less: Cash Spent in 2009 for Expenditures Booked in 2008      (28,596)
    Add:  Proceeds from sale of assets                                238
          Other non-cash items                                        330
                                                                      ---
    
    Net Capital Expenditures Booked in 2009 (non-GAAP)           $237,559
    Less: Leasehold Acquisitions                                  (15,843)
          Facilities & Infrastructure                              (3,814)
          G&G Expense                                              (1,869)
          Furniture, Fixtures & Equipment                          (1,006)
                                                                    -----
    Net Drilling and Completions Capital Expenditures (non-GAAP) $215,027 
                                                                 ========

OTHER INFORMATION

In this press release, the Company refers to several non-GAAP financial measures, Drilling and Completion capital expenditures, organic finding and development costs and Pre tax present worth discounted at 10%, or PV-10.  Management believes that the first two are useful measures of the Company's annual drilling expenditures and costs to develop new reserves during calendar year 2009, and the last is an alternative measure for valuing the Company's proved reserves.  Management also believes that these non-GAAP financial measures provide useful information to investors because they are widely used by professional research analysts in the valuation and investment recommendations of companies within the oil and gas exploration and production industry.  Drilling and Completion capital expenditures should not be considered an alternative to Costs incurred in oil and gas property acquisition, exploration, and development activities, as defined by GAAP.  While pre tax PV-10 is not an alternative to the standardized measure, the company expects such standardized measure calculation for the reserves at December 31, 2009 to be close to the PV-10 measure shown herein, due to the company's tax net operating loss position as well as the discounting effect arising from the timing of tax payments.

Organic finding and development costs included in this press release do not include all exploratory and development costs disclosed in accordance with Accounting Standards Topic 932 or future development costs and abandonment costs. Management believes that such organic finding and development costs, calculated using net drilling and completion capital expenditures, provide useful information regarding the dollars spent to add proved reserves because they are a better reflection of actual costs incurred to develop new reserve additions. Like all annual measures, organic finding and development costs do not account for the timing effects of costs incurred over multiple years or incurred in one year related to proved reserves booked in subsequent years.

The Company has provided the alternative proved reserve estimates in this release relating to oil and natural gas prices in effect on December 31, 2009 solely for illustrative purposes to demonstrate hypothetically the effect that year end economic conditions would have had on the Company's proved reserve estimates prepared using first-day-of-the-month average pricing for 2009 in accordance with revised rules of the SEC.

Certain statements in this news release regarding future expectations and plans for future activities may be regarded as "forward looking statements" within the meaning of the Securities Litigation Reform Act.  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.  Initial production rates are subject to decline over time and should not be regarded as reflective of sustained production levels.

Goodrich Petroleum Corporation is an independent oil and gas exploration and production company listed on the New York Stock Exchange.  The majority of its properties are in Louisiana and Texas.

SOURCE Goodrich Petroleum Corporation