Update: Goodrich Petroleum TMS Denkmann Well Result Impresses

Sep. 3.14 | About: Goodrich Petroleum (GDPM)


Goodrich Petroleum reported new well results for the TMS.

The stock remains a buy at the current level and on further dips.

The original investment thesis anticipated the stock bouncing around based on inconsistent well results providing for opportunities to own the stock on weakness.

Based on another solid well result in the TMS, Goodrich Petroleum (GDP) originally jumped on the news before fading with the general energy related weakness. The stock ended up down 2.6% on the day, mostly in line with other oil E&P firms. The market is very sensitive to news regarding the TMS considering the region is still unproven and it accounts for 52% of the 3P resource potential for Goodrich Petroleum.

The oil exploration firm reported that the Denkmann 33-28H-2 well in Amite Country, Mississippi produced a peak 24-hour average production rate of approximately 1,250 boe/d, comprised of 1,200 bbls of oil. The company is running three rigs in the play with several other wells in the completion and drilling phases. Remember that Goodrich has in excess of 300,000 net acres in the TMS that outshines all of the other positions including acreage in the Eagle Ford Shale and Haynesville Shale.

The original investment thesis in the article "The Prime Location Of Goodrich Petroleum Acreage" had suggested that investors take advantage of the topsy turvy stock action and buy the stock on dips. The stock originally sat at around $17 to start August due to weaker well results that placed the TMS play in question due to the high well costs. At $21.50, the stock is in the mid-point of the recent range. With this Denkmann well result, it's very possible Goodrich could reach the high end of guidance for 5,400 Bbls/d of oil production during Q3. If oil production starts hitting the high end of targets versus the low end that occurred during Q214, the stock will finally break above the $28 to $30 ceiling from the last year.

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