Goodrich Petroleum Corporation today announced its preliminary 2015 capital expenditure budget and operational update.
2015 capital expenditure budget
The Company today announced a preliminary capital expenditure budget for 2015 of US$150 – 200 million, with flexibility to accelerate with improvement in oil prices and the monetisation of certain assets described below. Oil-directed capital is estimated to be in excess of 95% of the total, with the entire oil-directed allocation to the Tuscaloosa Marine Shale, where costs are coming down and results have continued to improve. Oil production volumes are expected to average 6100 – 6700 bpd for the year, which represents 30 – 42% year-over-year growth. Natural gas volumes are expected to decrease by 15 – 20% year-over-year when factoring in the sale of the company's East Texas Cotton Valley field for approximately US$61 million, which was previously announced and is scheduled to close on 22 December 2014. Approximately 5% of the company's 2015 capital budget will be allocated toward natural gas development.
The Company entered the fourth quarter with pro forma liquidity of US$134.2 million under the company's US$250 million borrowing base. Upon closing of the sale of its East Texas property referenced above, the borrowing base will be reduced by US$20 million. The company is expecting a new borrowing base under its senior credit facility early in 2015, which will include reserve additions from development activities during the second half of 2014.
The company has 3500 boe/d, or 52 – 55% of estimated oil volumes for 2015, hedged at US$96.11 per bbl. Assuming US$65.00 per bbl for the remainder of the projected volumes, the estimated 2015 blended average oil price, prior to any basis or transportation costs, would be approximately US$81.00 –US$83.00 per bbl.
With a preliminary 2015 capital expenditure budget of US$150 – 200 million, the company is estimating it has sufficient projected liquidity under current market conditions, borrowing base and capital structure to execute its 2015 capital plan.
The Board of Directors has authorised management to explore strategic alternatives for all or a portion of the company's Eagle Ford Shale asset in the first half of 2015, which would significantly enhance the company's flexibility to further expand its development activities under better market conditions.
Tuscaloosa Marine Shale
In the TMS, the company today announced the completion of two additional wells in its Blades area of Tangipahoa Parish, Louisiana. The Verberne 5H-1 well, which was drilled and completed with an approximate lateral length of 6600 ft and was fracked with 21 stages, has been producing on a restricted choke program and has achieved a peak 24-hour rate to date of 1375 boe per day, comprised of 1335 boe and 250 Mcf of natural gas per day on a 14/64 inch choke. The Williams 46H-1 well, which was drilled with an approximate lateral length of 6400 ft and was fracked with 20 stages, is in early flowback and is currently producing approximately 1000 boe per day, but has not achieved peak rate. An update on this well will be provided at a later date. Both of these wells were completed with the Company's newly optimised frac design, which includes increased frac stage length with adjusted perforation cluster spacing, resulting in a reduced number of stages with similar proppant per foot; decreased fluid volumes, which reduced pump time per stage; and savings for plug drill out and rental equipment due to reduced number of stages. In total, these adjustments resulted in a savings in excess of US$1.1 million per well.
The company is in completion phase on its Kent 41H-1 well, which was drilled with an approximate 6000 ft lateral in 27 days at one of the lowest drilling cost to date. On the company's initial two-well pad, the CMR/Foster Creek 8H-1 has been drilled and the CMR/Foster Creek 8H-2 well is drilling in the lateral.
By achieving drill times of 25 – 30 days, as achieved by several industry-wide wells including the most recent Kent 41H-1 well, coupled with the recently modified frac design as utilised on the Verberne 5H-1 and Williams 46H-1 wells, the company believes it can achieve cost savings in excess of US$1.5 million for a single well pad prior to any reduction in service costs or savings associated with drilling off of multi-well pads. Substantial cost savings combined with the Company's strong 2015 hedge position, and the inherent advantages of the TMS, which include premium LLS pricing, lower average royalty burden and severance tax relief, allow for the continued economic development of the play in 2015.
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, changes in commodities prices and costs of drilling and completion, 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. In particular, production from horizontal drilling in shale oil and gas resource plays and tight oil and gas plays that are stimulated with extensive pressure fracturing are typically characterised by significant early declines in production rates.
Goodrich Petroleum is an independent oil and gas exploration and production company listed on the New York Stock Exchange.
Adapted from press release by Joe Green
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