Goodrich Petroleum Directors Buy on Pullback

Goodrich Petroleum Directors Buy on Pullback

After shares of Goodrich Petroleum Corp. pulled back from a multi-year high, two directors at the oil & gas exploration outfit bought stock.

Director Josiah Austin purchased 10K shares at $27.29 on September 20th and 6K shares at $26.46 on September 25th, increasing his holdings to approximately 5.655M shares, or about a 22.7% stake. Meanwhile, Director Gene Washington bought 300 shares at $27.48 on September 26th, increasing his holdings to 28.9K shares.

A four-time All-Pro wide receiver with the San Francisco 49ers, Washington has been the Director of Football Operations with the National Football League since 1994 and a Goodrich Petroleum director since June 2003. He previously made small purchases of Goodrich Petroleum at $23.10 in June and $20.05 in August 2005. His largest purchase came in July 2005, when he took down 20K shares at $9.07. Washington was named to the board of teen apparel retailer dELiA*s, Inc. on September 27th.

Austin, who is Goodrich Petroleum’s largest shareholder, is an Arizona cattle rancher with an environmentalist bent. He has won praise from numerous organizations for his efforts to restore the habitat on his land, some of which is leased from the U.S. Forest Service. As an investor, and through his El Coronado Holdings vehicle, Austin owns more than 10% stakes in biotech firm Novogen Ltd. and Emergency Filtration Products Inc. , a maker of respiration equipment and environmental masks. Austin is also a director at North Fork Bancorp., Inc. , where his stock holdings are presently worth more than $100M. All told, Austin’s four disclosed public holdings have a value of more than $300M.

Over the past 18 months, Austin has purchased approximately 758.2K shares of Goodrich Petroleum at an average price of $20.59. His last buys came in May when he took down 84.6K shares at $23.28 to $25.84. Another director, Michael Perdue, was the last Goodrich Petroleum insider to purchase stock. Perdue bought 5K shares at an average price of $31.79 on July 12th.

Directors at Goodrich Petroleum receive an annual cash retainer of $10K and an annual grant of common stock equal to $30K (based on the average closing price of Goodrich Petroleum’s common stock for 20 trading days preceding the annual meeting). As chairman of the Compensation Committee, Washington receives an additional $5K in cash compensation annually.

Shares of Goodrich Petroleum hit $35.95 on August 8th, the same day the company reported second-quarter results, and the stock’s highest price since August 1990 (Goodrich Petroleum reverse-split 1-for-8). Following the rest of the energy complex, the stock has slid since then.

For Q2, Goodrich Petroleum reported net income after the payment of preferred dividends of $2.8M, or 11 cents per share, swinging from a loss of -$603K, or -3 cents per share, a year earlier. Revenues grew 126% to $30.6M, thanks to a 103% increase in production and rising oil prices. Goodrich Petroleum’s earnings missed analyst estimates by a penny per share, but revenue came in above the $28.8M consensus. Eighty-three percent of Goodrich Petroleum’s production came from natural gas in the quarter, and the company said its production volume increase was achieved from organic drillbit growth.

Three weeks after it reported earnings, Goodrich Petroleum said lenders had approved a $45M increase to its borrowing base to $150M, and a $20M increase in a term loan, available to be drawn over the next 30 days. The company also restructured the terms on one of its natural gas hedges, canceling a collar on 10,000 mmbtu per day that had a $7.00 floor and a $16.90 ceiling and replacing it with a similar collar with a $9.00 floor and a $10.65 ceiling for all of 2007. Goodrich Petroleum received a cash premium of $58K for restructuring the hedge.

“With the increase in the Borrowing Base and Term Loan, we are confident we have the necessary liquidity to continue to execute our strategy of aggressively developing our core Cotton Valley trend acreage position for the remainder of this year and into 2007. We are pleased with our bank group’s support of our strategy and the 43% increase in the Borrowing Base in particular is a testament to the drilling results achieved during the first half. In addition, by raising the floor price on a portion of our 2007 hedges to $9.00 per mmbtu, we have further enhanced our downside protection for natural gas prices. These restructured hedges, when combined with our other existing hedges, allowed us to increase the blended average floor or minimum price we will receive on an average 31,200 mmbtu per day in 2007 to $7.70 per mmbtu,” said CEO Walter Goodrich.

Worth Noting: issued its first Research Note on Goodrich Petroleum in May 2005 when Austin purchased 261K shares at prices between $15.40 and $17.08. We issued additional Research Notes on the name in July 2005, October 2005, February 2006, and July 2006.

No member of the editorial staff contributing to this article has any long or short positions in any company mentioned. Indie Research has a disclosure policy.

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