Goodrich Petroleum Corp. (NYSE:GDP) Q3 2018 Earnings Conference Call Transcript

Nov 08, 2018 • 11:00 am ET

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Goodrich Petroleum Corp. (NYSE:GDP) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day and welcome to the Goodrich Petroleum Third Quarter 2018 Earnings Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there'll be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Gil Goodrich, Chairman and CEO. Please go ahead.

Executive
Gil Goodrich

Thank you and good morning everyone. Thank you for participating with us this morning in our third quarter call. We are pleased to have the opportunity to share our third quarter results with you as well as to discuss our ongoing activity and plans. In conjunction with the call, we have again prepared a slide presentation and we would invite you to follow the slide deck during the prepared remarks. You can access the slide presentation on our website at goodrichpetroleum.com and it is entitled Earnings Call Slides Third Quarter 2018. Our standard disclaimer, forward-looking statements and risk factors are highlighted for you on slide two of the presentation.

We are very pleased with the third quarter results which met or exceeded our internal estimates in almost every reported category. In addition, the continued momentum achieved during the third quarter has positioned us well to deliver additional growth in the fourth quarter.

On slide three, you will see our company overview, which includes the third quarter production results which grew 40% sequentially over the second quarter to just under 85 million cubic feet of gas equivalent per day. Quarterly volume growth continues and we are providing production guidance for the fourth quarter in which we project will range from an average of 95 million to 105 million cubic feet of gas equivalent per day. In addition, we reiterate our preliminary 2019 production guidance of 100% year-over-year growth or an average for the year at the midpoint of 140 million cubic feet of gas equivalents per day.

Due to a large percentage of our operating expenses remaining relatively flat on an absolute basis and the very low incremental lease operating expenses or LOE associated with new well additions, we are experiencing significant margin expansion with rapid production growth. The margin expansion and associated EBITDA should allow us to execute our 2019 plans and capital budget with very manageable outspend while maintaining net debt to EBITDA in the range of 1.0 times to 1.5 times.

To further protect EBITDA for 2019, we recently added to our 2019 natural gas hedge position which you will find in the appendix section of our earnings slide presentation. The updated hedge position provides us with just over 70 million cubic feet of gas hedged for calendar year 2019 or approximately 70% of the midpoint of our fourth quarter of 2018 estimate at a blended average price of $2.88 per Mcf. And adding in our existing crude oil hedges for next year, the blended average hedge price for 2019 is approximately $3.12 per Mcf equivalent.

On slide four, we highlighted our reported third quarter capital expenditures of $38.3 million