Deal allows company to pay credit revolver, retain additional assets for monetization or oil price rebound
Like many oil and gas companies in the wake of falling oil prices, the Houston, TX-based company is looking to increase liquidity. Folllowing the close of its East Texas Cotton Valley asset sale in late 2014, the company noted plans to explore strategic alternatives for Eagle Ford assets in the first half of 2015.
While "all or a portion" of its Eagle Ford assets were up for consideration at that time, today's announcement calls for the monetization of a portion of the assets--leaving Goodrich with an undeveloped leasehold in the play. In what company president Robert Turnham called “an important aspect” of the transaction, Goodrich will retain approximately 58% (approximately 17,000 net acres) of its undeveloped Eagle Ford leasehold, allowing for “additional future value creation in what we believe will be an improved oil price environment.”
In the short-term, the Houston-based company hopes to pay off its bank revolver— which carried a $52 million balance at the end of 1Q15 according to Stifel analyst calculations—and retain any remaining cash from the proceeds.
With 1Q15 production from the properties sitting at 2,850 boe/d (75% oil) and YE14 proved reserves of 10 MMboe, the analysts noted an implied transaction price of $41.4k/boe/d or $12/boe.
Going forward, Turnham said, “we continue to drive our well costs lower yet will remain conservative with our activity level, as we reiterate our full year capital expenditure budget of approximately $100 million, with sharply reduced capital expenditures in the last three quarters of the year."
Near-term liquidity is improved with the Eagle Ford asset sale, but Stifel analysts believe the balance sheet “will remain a challenge over the next 18 months barring a significant rebound in oil prices,” as it includes convertible senior notes with a put option of $169 million on October 1, 2017 with the potential to become current on October 1, 2016, they noted.
Citigroup Global Markets Inc. advised on structuring of the transaction, which is expected to close on or before September 4, 2015.