Goodrich soars on TMS results

TMS success: Goodrich participates in best well to date in emerging play

Goodrich Petroleum continued to trade higher on Friday, despite a quarterly loss, after reporting results of a partner's well that appear to be the best to date in the emerging Tuscaloosa Marine shale (TMS).

Goodrich's New York-listed shares closed up about 9% after it announced earnings on Thursday, and were up another 1.58% on Friday afternoon at $19.30.

The boost came from results of Encana's Lewis 7-18H-1 well, in which Goodrich has a 17% working interest.

The well in Amite County, Mississippi, hit a peak 24-hour production rate of about 1500 barrels of oil equivalent per day with 93% oil. It was drilled with an approximate 8100-foot lateral with 29 frac stages.

"No question, at least early days, that's likely the best well drilled to date" in the TMS, chief operating officer Rob Turnham said on a conference call.

Another Encana-operated well in Amite County, the Mathis 29-32H-1, hit a 24-hour peak rate of around 1300 boepd with 92% oil on a 6400-foot lateral and 17 frac stages. Goodrich also has a small interest in that well.

As the largest acreage holder in the TMS, Goodrich is poised to rise and fall based on well results from the play. The majority of its spending is centred on the TMS, including about 70% of the $106.5 million it spend in the entire second quarter.

Industry is still trying to figure out the best way to tap the TMS efficiently and economically. Well costs have been one of the biggest impediments for companies looking to declare the TMS commercial.

Encana, one of the early movers and leading operators in the TMS, has found extended laterals measuring 8000 feet or more to be an effective method of squeezing the most oil out efficiently.

Goodrich has tended more towards laterals measuring between 5000 and 6000 feet on its operated wells. The company believes it can trim TMS well costs to around $11.5 million by the end of the year.

"While we generally believe that longer is generally better... the problem today is just trying to balance what near-term well costs are versus anticipated results," chief executive Gil Goodrich said.

"So, if it ultimately looks like 8000 or 9000 feet is the right way to go from an economic standpoint, then that's what we'll be doing. In the near term, we think that anything north of ,000 and certainly 6000 to 6500 feet is certainly good today."

For the three months that ended in June, Goodrich lost $32.5 million, up from the $20.1 million it lost in the second quarter of 2013.

Revenues for the quarter totaled $53.3 million against $48.5 million a year earlier.

Oil production averaged about 4200 barrels per day, up 11% from 3200 bpd a year ago.

Gas production averaged 68.6 million cubid feet equivalent per day, down from 73.2 cfepd a year earlier.

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