Goodrich Petroleum (GDP) Stock Falls as Crude Oil Prices Decline

NEW YORK (TheStreet) -- Shares of Goodrich Petroleum (DGP) were falling 16.3% to $1.80 Wednesday as crude oil prices were falling.

WTO crude oil for July delivery was down 1.1% to $59.33 a barrel Wednesday afternoon and Brent crude oil for August delivery was down 1% to $63.04 a barrel.

Oil prices were falling Wednesday after the U.S. Energy Information Administration's weekly report said that U.S. crude inventories fell by 2.7 million barrels and gasoline stocks grew by 460,000 barrels in the week ending June 12, 2015. Analysts surveyed by Reuters expected crude inventories to fall by 1.7 million barrels and gasoline stocks to fall by 314,000 barrels.

The EIA said that "U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years," in its weekly report.

About 5.9 million shares of Goodrich Petroleum were traded by 1:02 p.m. Wednesday, above the company's average trading volume of about 2.7 million shares a day.

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

"We rate GOODRICH PETROLEUM CORP (GDP) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."

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

  • The debt-to-equity ratio is very high at 28.35 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.21, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness 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.
  • GDP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 90.96%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Net operating cash flow has decreased to $5.72 million or 12.78% when compared to the same quarter last year. Despite a decrease in cash flow GOODRICH PETROLEUM CORP is still fairing well by exceeding its industry average cash flow growth rate of -53.28%.
  • Along with the very weak revenue results, GDP underperformed when compared to the industry average of 38.6%. Since the same quarter one year prior, revenues plummeted by 53.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: GDP Ratings Report

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