Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



This Could Send Goodrich Petroleum Stock Even Higher

Is it possible that after a volatile move higher in shares of Goodrich Petroleum Corp (NYSE: GDP  ) since February that it could head even higher and potentially significantly so? The oil exploration and production company has recently announced drilling results in the Tuscaloosa Marine Shale, or TMS, that had gotten progressively better until the last well after some initially disappointing outcomes.

In reality, the recent decline from $30 only has the stock back to levels barely above the highs of 2013 while the production results suggest the company could sit on some very oily acres. Comparing the recent valuation to some other players in liquids-rich areas such as Gulfport Energy Corp (NASDAQ: GPOR  ) and Halcon Resources (NYSE: HK  )  makes the stock worth a longer look.

TMS turning into a premier oilfield
While Goodrich Petroleum isn't all about the TMS, it does have a large focus in the shale along with nearly half of the total resource potential for the company. The other major resource potential is in the Haynesville Shale, which is focused on natural gas. In fact, Goodrich was a successful driller in the Haynesville until natural gas prices plunged.

With over 310,000 net acres in the TMS, the company has seen the stock rise and fall and rise again on the back of that potential resource. Some initial bad results nearly crushed the stock, but the recent results are starting to support a potential home run in the region. A well turned on production back in April at initial production rates of 1,270 boe/d followed by a June well with 1,450 boe/d peak production rate. With both wells producing over 95% oil, the company is quickly able to cover the well costs, which hit $13 million each. Unfortunately, the most recent well result of 740 boe/d has the market confused on the real potential of the acreage.

In a similar manner, Halcon Resources has built up a 314,000 net acre position in the TMS with recent strong well results. The most recent well announced in early June could produce up to 1,548 boe/d. 

With capital expenditures doubled for the second quarter compared to the first quarter, Goodrich should begin seeing considerable production growth after a few years of declines in Haynesville production after dramatically reducing expenditures.

Huge resource potential
With an enterprise value of only $2 billion, Goodrich Energy remains a relatively small E&P play. The dilemma for investors is that the company has proved reserves focused mostly on a couple of plays around the Haynesville Shale that provide them 452 Bcfe of gas. The key, though, is that the resource potential soars to 8,577 Bcfe based on the TMS and the Shelby Trough portion of the Haynesville Shale, both areas account for around 7% of the current proved reserves. 

Source: Goodrich Petroleum

The current enterprise value amounts to a value of roughly $1.46 per boe based on the huge resource potential.

Though an energy firm like Gulfport Energy has roughly double the production and revenue levels, it has smaller proved reserves and acreage positions. Gulfport only has approximately 179,000 net acres in the Utica/Point Pleasant Shale and the company reported year-end proved reserves of only 38.4 million boe.  

Bottom line
Goodrich Petroleum has a relatively small enterprise value for the resource potential owned. The company faces risks primarily in the development of the TMS that again popped up with a low well result, but enough wells have produced solid oil production in the region from both it and Halcon Resources to suggest the company is now on the path to major growth.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven't heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America's greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, "The IRS Is Daring You to Make This Investment Now!," and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3023285, ~/Articles/ArticleHandler.aspx, 9/3/2015 1:00:23 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Mark Holder

Mark has been writing for TMF since Dec. 2012 with a primary focus on taking advantage of opportunities provided by the market in the energy and tech sectors.

Today's Market

updated 3 hours ago Sponsored by:
DOW 16,351.38 293.03 1.82%
S&P 500 1,948.86 35.01 1.83%
NASD 4,749.98 113.87 2.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 4:02 PM
GDP $0.83 Down -0.01 -0.60%
Goodrich Petroleum… CAPS Rating: **
GPOR $34.31 Up +0.03 +0.09%
Gulfport Energy Co… CAPS Rating: **
HK $1.02 Up +0.03 +2.75%
Halcon Resources C… CAPS Rating: **