Goodrich’s Eagle Ford Shale Exposure Amplifying its Oil Content to Drive Profitability

Monday 13 February 2012, Amsterdam

Goodrich’s Eagle Ford Shale Exposure Amplifying its Oil Content to Drive Profitability

Goodrich has been a predominantly natural gas centric company with its reserve base and production largely dominated by natural gas. During 2007 – 2010, despite of positive revenue numbers the company has consistently reported negative earning except for 2008. These continuous negative earnings for years coupled with sustained low natural gas prices, made Goodrich shift its focus towards development of crude oil through Eagle Ford shale. Goodrich acquired 55,000 gross and 39,000 net acres in the oil rich Eagle Ford shale in South Texas area during April 2010. The company has total proved reserve of 2.5 MMboe and unrisked resource potential of 145 MMboe in Eagle Ford shale. This exposure into the Eagle Ford shale is in line with Goodrich’s strategy of increasing its oil mix in its reserve and production portfolio. As of December 2010, crude oil accounted for 2.1% of Goodrich’s total proved reserves and 2.7% of the company’s total production. The figure below shows the Eagle Ford shale’s top companies by acreage for 2011.

See figure: Goodrich Petroleum Corporation, Eagle Ford Shale, Top Companies by Acreage, Latest Reported

Goodrich plans to spend around $175m, or 56% of its estimated capex, on leaseholds, drilling, and completion costs associated with the Eagle Ford shale oil play during 2011. Moreover in 2012, the company has allocated the capex of $155m for the development of Eagle Ford shale. The company plans to drill around 29 gross (19 net) wells during 2012, with two drilling rigs dedicated to this shale play.

With this, Goodrich expects that its oil volume will grow from 0.15 MMbbls in 2010 to 0.60 MMbbls in 2011and oil contribution towards total production will be around 9%. This increased oil mix along with surging crude oil prices will enable Goodrich to create additional production value and enhance its profitability. The figure below shows the Goodrich’s projected oil production for 2011 – 2015.

The Eagle Ford Shale is one of the emerging oil rich shale in the US. They expects that future development activities in this shale will increase the oil contribution towards Goodrich upstream portfolio. During 2010 oil’s contribution towards total company’s production remained around 2.7% which is expected to reach 19% by 2015. GlobalData expects that oil production will grow at the CAGR of 36.5% for 2011 – 2015.

Goodrich strategy to shift towards Eagle Ford shale seems to be a right, as it will enable the company to maintain the right commodity mix, required to mitigate the associated price risk. GlobalData expects that with further development in Eagle Ford shale, Goodrich will be able to report positive bottom-line and will be able to grow in long run.