Goodrich's Shale Program Lifts Reserves to New Heights
Goodrich Petroleum's proved oil and natural gas reserves as of December 31, 2009 increased by 4.5% to 420.6 billion cubic feet equivalent ("Bcfe") of natural gas versus the prior year period. Year-end proved reserves were 99% natural gas and 39% developed. The present value, using a 10% discount rate, of the future net cash flows before income taxes of the proved reserves (the "PV-10 Value") was approximately $148.2 million, using average first day-of-the-month 2009 prices of $3.87 per MMBtu for natural gas and $61.18 per barrel for oil. Under the previous SEC pricing guidelines, the same year-end proved reserves would have been 460.0 Bcfe, with a PV-10 Value of approximately $550.0 million using year-end prices of $5.79 per MMBtu of gas and $79.39 per barrel of oil. The PV-10 Value is different from the standardized measure of discounted estimated future cash flows, in that the latter measure is calculated after a reduction for the discounted value of estimated future income taxes.
The Company had proved reserve additions of 314.3 Bcfe before revisions, based on drilling and completion capital expenditures of $215.0 million, for an organic finding and development cost of $0.68 per Mcfe. When including approximately 259.6 Bcfe of negative revisions due to lower prices used in the year-end 2009 reserve report, organic finding and development cost was $3.93 per Mcfe. Proved developed reserve additions were 67.1 Bcfe before revisions, with a proved developed organic finding and development cost of $3.21 per Mcfe. When factoring in approximately 22.3 Bcfe of negative price-related revisions to proved developed reserves, organic finding and development cost was $4.81 per Mcfe.
The Company's successful Haynesville Shale drilling program was the primary driver of the growth in production and proved reserves in 2009. Reserve additions were driven by the booking of 180.1 Bcfe of proved reserves associated with the Haynesville Shale, at an average gross estimated ultimate recovery ("EUR") per horizontal well of approximately 6.5 Bcfe of proved reserves (includes reserves booked for both East Texas and Northern Louisiana), and 117.9 Bcfe of Cotton Valley horizontals, at an average gross EUR of 5.5 Bcfe of proved reserves per well. These additions were offset in part by total downward revisions of 266.3 Bcfe, which were primarily attributable to the lower average 2009 natural gas price used to determine the proved reserves and the elimination of all vertically drilled proved undeveloped reserves, as the Company has made a strategic decision to concentrate solely on horizontal drilling at this time.
The proved reserves as of December 31, 2009 were fully engineered by Netherland, Sewell and Associates, Inc. ("NSA") and were calculated based on new U.S. Securities and Exchange Commission ("SEC") rules that went into effect for the Company's year end 2009 oil and gas reserve reporting. The revisions to the rules were intended to modernize and update the rules to align them with current practices and changes in technology. In addition to changing the price used to determine proved reserves to a simple average of the first-day-of-the-month price for each of the twelve calendar months, other changes pertinent to our proved reserves at year end included the limitation on the inclusion of most proved undeveloped reserves to those reserves that are scheduled to be developed within five years.
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