The Houston-based oil driller said setbacks at St. Gabriel field in South Louisiana and at the Cotton Valley trend in east Texas will cause sequential growth to be slightly lower than previously expected and in a range between 5% and 10% over the volumes produced during the second quarter. The company said it believes it is on pace for year-over-year production volume growth in excess of 85%.
Goodrich also boosted its 2006 capital spending budget by 16% to $255 million. The outlay will provide for a continued accelerated pace of drilling and completion expenditures in the Cotton Valley trend, as well as allow for the initial construction phase of a low pressure gas gathering and salt water disposal system in the North Minden and Dirgin-Beckville area in Rusk and Panola Counties, East Texas.
"With the rapid pace of drilling we have undertaken in our core North Minden and Beckville area and the increasing volumes of gas being produced into our existing gas gathering system in that area, we felt it was important to begin construction of the low pressure gathering system immediately to maximize our gas production capacity and reduce the risk of throughput constraints," said CEO Gil Goodrich. "In the interim, and to help ensure we do not see any material negative impact on production volumes, we will be drilling more wells than previously planned in the Bethany-Longstreet and Cotton South areas, as well as initial wells on our Brachfield prospect in Panola County, our Phoenix prospect in Upshur County and our Sunshine prospect in Smith County, all of which are targeting the Cotton Valley section.
"We believe this plan and the installation of the LPGS will allow us to continue the rapid production growth we have experienced over the last two years. In addition, we recently closed on the previously announced $20 million increase in our Second Lien Term Loan and increased our Borrowing Base up to $150 million, the combination of which should provide ample liquidity for us well into 2007. When coupled with our recently announced restructuring of a portion of our natural gas hedges, providing us with approximately 15,000 Mmbtu hedged at a fixed price of $6.95 per Mmbtu for the fourth quarter of this year and approximately 31,200 Mmbtu hedged in a combination of fixed price swaps and costless collars with a blended average minimum price of $7.70 per Mmbtu for calendar year 2007, we feel we have protected a significant portion of our cash flow for the remainder of 2006 and into 2007."