Ranjit Thomas

Goodrich Petroleum: Gas in the Ground Doesn't Mean Cash in the Bank

Thanks for all your comments. I agree that when valuing at a company, one should look at the NPV of future cash flows, and not just one year like 2009. However, as I am putting a 25x multiple on '09 earnings, I am capturing the cash flow from many future years, and also assuming that the cash flow will be growing. I think the optimists have grossly underestimated the extraction costs (both operating and capital) involved. Only time will tell. Today, the company announced a secondary equity issue - I pointed out in my article that this was a possibility and something they have frequently done. Clearly, this is an indication that management believes the stock is overvalued.

Goodrich Petroleum Well Positioned to Go For Shale

How about backing up your analysis with what you think the company will do in terms of revenue, earnings and free cash flow? You will quickly realize that this stock is grossly overvalued on a fundamental basis.