Goodrich discovers natural gas at Plaquemines Parish prospect

Jul 02, 2001 02:00 AM

Goodrich Petroleum's natural gas discovery on its Marciano Prospect at West Delta 83 Field in Louisiana provides further validation of the company's approach to exploration and development, says Alex Montano, a covering analyst with CK Cooper & Co. Goodrich said it has drilled and logged 64 feet of net pay in five separate zones in the Plaquemines Parish prospect. USA 5 No. 4 well was drilled and logged to a total depth of 10,110 feet and encountered hydrocarbons in the CP-3, CP-4, 9600-foot, 10,100-foot and 10,100-foot "E" sands.
Goodrich has taken sidewall cores and formation tests and will be completing the well, in which it owns a 95 % working interest, during July. Additional information will be released when production begins, the company added.

Houston-based Goodrich, which focuses on oil and gas properties in Louisiana and Texas, is good at buying older, mature fields that were previously owned or operated by the majors, going in and stopping decline rates through better field management, says Montano. "In many cases they've stumbled on additional exploration potential in deeper zones, which creates further upside for the company."
Discoveries such as the one announced are demonstrating what that upside could mean to Goodrich, he adds. "The three fields they have in this game -- West Delta, Burrwood and Lafitte, all in Louisiana -- have pretty significant potential. The surrounding fields have produced over three tcf of gas from formations of 10,600 feet or deeper. So far Goodrich hasn't produced anything from those depths and while we don't expect them to find three tcf, it's probably in the range of 15 to 30 bn cf or even more."
The Louisiana properties represent a great core asset, according to Montano, who says that their upside is mainly locked in probable and potential reserves. "They're starting to define it now and as a result, we expect their production volume to almost double in the second half of 2001. It makes for a pretty exciting story."

C.K. Cooper & Co. recently modified its 2001 estimates for Goodrich, lowering the EPS figure to 20 cents per share on a fully diluted basis while raising its cash flow per share figure to $ 1.07. The company will experience several significant non-cash charges this year, including a one-time charge on conversion of Preferred Shares and certain hedging charges based on recent accounting changes.
"We continue to project EBITDA in excess of $ 20 mm or over $ 1.00 per share on a fully diluted basis. We continue to find Goodrich appealing on a long-term basis 'and find our goal price of $ 7.50 a share sound." C.K. Cooper rates Goorich a short-term "buy" and a long-term "strong buy".
According to Montano, the company's current valuation is "pretty fair". "Their break-up value is in the $ 7.50 to $ 8 per share range and they're now trading at 4.5 to 5 times cash flow, which is quite reasonable. It's very difficult to give them additional value right now for what might be there." However, each time Goodrich drills an exploration well that produces results it creates additional value for the company's overall concept, he says. "The $ 7.50 target price is now under review and we may raise it, depending on developments in the coming weeks."

Source: Stockgroup.com
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