Goodrich Petroleum Continues Development of Cotton Valley Trend Acreage

Cotton Valley Development
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Goodrich Petroleum today issued an operational update on its Cotton Valley development, an updated damage assessment and status of production in the wake of Hurricanes Katrina and Rita, estimated mid-year reserves of oil and natural gas and an estimate of the expected unrealized hedging loss in the third quarter due to increasing strength in natural gas futures prices.


The Company has continued with the aggressive development of its acreage in the Cotton Valley Trend. As previously announced, the Company has further increased its 2005 capital expenditure budget to $135 million from a preliminary budget of $75 million, with an estimated $118 million being budgeted on the drilling of approximately 69 wells on the Company's 100,000 gross acres in the Cotton Valley Trend and approximately $17 million on 11 projects in South Louisiana. The Company has drilled 50 wells in the Cotton Valley Trend to date with a 100% success rate. Of the 50 wells drilled to date, 42 are producing and 8 are currently being completed and anticipated to be online within 30 days. The average initial gross production rate for the 42 producing wells is approximately 1,500 Mcf per day. After anticipated declines in production, the 42 producing wells are currently producing approximately 22,500 gross Mcfe of gas per day or an average per well of approximately 535 Mcfe per day. The Company continues to operate 8 drilling rigs in the Trend.


The Company has completed an assessment of its operated facilities in South Louisiana after the passing of Hurricanes Katrina and Rita and indications are that it has not incurred material physical damage from either of the storms, although the Company's gas production at Burrwood remains shut-in due to third party transportation and processing constraints downstream from the field. The Company was also forced to shut-in its production from Second Bayou for Hurricane Rita, which comprised approximately 3% of its second quarter production. However, the Company has re-established production at Burrwood on approximately 1,000 gross barrels of oil per day from the field, all of its production from the Lafitte field as of October 3, 2005, and anticipates restoring additional crude oil production from Burrwood and Second Bayou over the next couple of weeks and natural gas production as soon as downstream pipelines and processing is restored.


The majority of the Company's production in South Louisiana, and all of its production in the Burrwood/West Delta 83 and Lafitte fields, was shut-in approximately August 24, 2005 in advance of Hurricane Katrina, and remains shut-in except for the above mentioned crude oil production restored at Burrwood/West Delta 83. During the third quarter and prior to shutting in production for Hurricane Katrina, the Company estimates its net production from its fields in South Louisiana affected by the two hurricanes averaged approximately 12,500 Mcfe per day. Despite this production being shut-in for most of the second half of the third quarter, the Company estimates its third quarter production volumes will exceed the 21,500 Mcfe per day produced in the second quarter of 2005.


The Company has completed a mid-year review of its crude oil and natural gas reserves in conjunction with its third party reservoir engineering firm. The mid-year reserves, which are a combination of new third party evaluated reserves in 2005 and an internal update and roll-forward of existing reserves, are estimated to be approximately 150 billion cubic feet of natural gas equivalents (Bcfe) compared to year end 2004 proved reserves of approximately 101 Bcfe. The mid-year reserve estimates are comprised of approximately 116 Bcf of natural gas and 5.6 million barrels of crude oil or approximately 77% natural gas. The effective date of the reserve report is July 1, 2005.


Due to the continued strength in the futures market for natural gas and the likelihood that the Company's existing natural gas hedges will again be deemed to be "ineffective" from an accounting perspective, the Company estimates the unrealized "change in the fair value" of its natural gas hedges as of September 30, 2005, which will be reflected in the Company's third quarter financials, to be approximately $30 million. The unrealized loss is a non-cash expense related to the Company's hedging activities and is not a component of operating income. The Company expects to book a corresponding income tax benefit associated with the unrealized derivatives loss of approximately $10.5 million.

The Company continues to hedge a portion of its future production volumes as part of its strategy to mitigate risk as it has significantly ramped up its development activity in the Cotton Valley Trend. So long as its natural gas hedges are deemed to be "ineffective," the Company would expect to report significant changes in the fair value of its derivatives, both gains and losses, on future income statements as its existing hedges roll off over time, new hedges are added at then current market conditions and as prices continue to fluctuate in the natural gas futures market.

Since the end of the second quarter the Company has put in place two additional natural gas hedges consisting of non-cash collars. For the full calendar year 2007, the Company has entered into a cashless collar on 10,000 MMBtu per day with a $7.00/MMBtu floor and a $16.90/MMBtu ceiling. For the period April through December 2007, the Company has entered into a cashless collar on 5,000 MMBtu per day with a $7.00/Mmbtu floor and a $13.90/MMBtu ceiling.


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