Goodrich Petroleum Corp. (NYSE:GDP) Q1 2020 Earnings Conference Call - Final Transcript

May 07, 2020 • 11:00 am ET

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Goodrich Petroleum Corp. (NYSE:GDP) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, and welcome to the Goodrich Petroleum First Quarter 2020 Earnings Conference Call. [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, sir.

Executive
Walter G. Goodrich

Thank you, Cole. Good morning, everyone. Thank you for participating in our first quarter 2020 earnings call this morning. Like almost everyone else in the world, we have adapted and adjusted our procedures and protocols in response to the COVID-19 lockdown. We have successfully managed through the past couple of months with little to no impact on our operations or performance. In addition, our Haynesville Shale natural gas focused strategy and hedge position has almost completely protected us from the recent crash in crude oil prices, with our first quarter production mix being 98% natural gas and approximately 60% of our first quarter crude oil production protected by hedges at approximately $60 per barrel.

We are seeing the impact of the crude oil sell off, including dramatic reductions in oil-directed rig count activity as well as crude shut-ins, which are reducing the amount of forecasted associated natural gas production. This in turn has resulted in significant improvement in the forward-looking strip prices for natural gas since we last reported to you in early March, with calendar year 2021 strip prices now trading at approximately $2.70 per Mcf.

At the same time, the steep decline in rig count is leading to materially lower bids for goods and services across the board, including rig, pipe and frac spread rates, which cumulatively are reducing our average forecasted completed well cost by approximately 15% to 20%. The combination of the lower capex cost and improving natural gas strip prices have us encouraged and expecting we will be achieving even more compelling returns on our capital in the second half of the year and into 2021.

Currently, we're in the process of releasing the rig that we have had under contract and plan to take an approximate two-month break before resuming drilling operations again. This schedule is part of our overall strategy and plan to remain in maintenance capex mode designed to keep production levels roughly flat while generating significant free cash flow. While this is our current plan, we maintain the flexibility to increase activity levels and resume a higher rate of growth at such time as market conditions dictate and our Board of Directors believes that, that is the best way to provide the best return for our shareholders.

We have again prepared a slide presentation and we invite you to follow the slide deck during our prepared remarks. You can access the slide presentation on our website at goodrichpetroleum.com and see entitled under Presentations 1Q 2020 Earnings Presentation.

I will now turn to the slide presentation for those of you who would like to follow along, and our standard disclaimer, forward-looking statements and risk factors are highlighted for you on Slide 2. On Slide 3, we provide you with certain specific