Why Goodrich Petroleum (GDP) Stock Is Down Today

NEW YORK (TheStreet) -- Goodrich Petroleum (GDP) was falling 5.7% to $23.79 Monday after announcing a Tuscaloosa Marine Shale well update.

The Beech Grove 94H-1 well achieved a peak 24-hour production rate of about 740 barrels of oil equivalent a day, comprised of 672 barrels of oil and 412Mcf of gas on a 19/64-inch choke. The well was drilled with a 6,000 foot lateral and landed in Goodrich Petroleum's lower target. The company completed the well with 21 frac stages.

Goodrich Petroleum is currently operating three rigs in the Tuscaloosa Marine Shale, and plans to increase the number to as many as five by the end of 2014. The company has more than 300,000 acres in the play.

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TheStreet Ratings team rates GOODRICH PETROLEUM CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate GOODRICH PETROLEUM CORP (GDP) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 10.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 114.05% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Net operating cash flow has slightly increased to $6.56 million or 4.51% when compared to the same quarter last year. Despite an increase in cash flow, GOODRICH PETROLEUM CORP's cash flow growth rate is still lower than the industry average growth rate of 17.65%.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GOODRICH PETROLEUM CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Currently the debt-to-equity ratio of 1.51 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, GDP has a quick ratio of 0.56, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • You can view the full analysis from the report here: GDP Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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