Goodrich Petroleum (NYSE:GDP) will continue to transition the company in 2012 towards the development of crude oil plays, with plans to spend 75% of the company's capital budget on these areas in 2012.
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2012 Capital Budget
The company announced a capital budget for 2012 ranging from $250 million to $275 million, with approximately 95% allocated towards drilling and completion activities in various parts of the company's oil and gas portfolio.
It estimates that this level of spending will cover between 29 and 32 net wells in 2012, and generate production growth from 10 to 15% over 2011. The company estimates that production of oil will exit 2012 at a rate of 5,000 barrels of oil per day, up more than 120% from 2011. (For related reading, see What Determines Oil Prices?)
Goodrich has been transitioning away from natural gas development and will spend 75% of its 2012 capital budget on various oil plays in the company's portfolio. The majority of the funds will be spent in the Eagle Ford Shale in Texas, along with a smaller amount in the Tuscaloosa Marine Shale in Louisiana.
Eagle Ford Shale
It has budgeted $155 million or more than 60% of its 2012 capital budget towards the Eagle Ford Shale in Texas. The company has 39,000 net acres under lease in the oil window of this play, and estimates that it will drill 19 net wells here in 2012.
Tuscaloosa Marine Shale
The company has 80,000 net acres prospective for the Tuscaloosa Marine Shale, an early stage oil play in Louisiana and Mississippi. It is looking to spend from $20 million to $45 million here in 2012 to drill between two and four net wells.
There are several other operators active in this emerging unconventional play. EnCana (NYSE:ECA) has drilled several wells in the Tuscaloosa Marine Shale. The company reported one well with an initial production rate of 373 BOE per day.
Devon Energy (NYSE:DVN) has 1.2 million acres of prospective inventory in the company's New Ventures group, including 265,000 net acres exposed to the Tuscaloosa Marine Shale. The company drilled three wells here in 2011 and recently signed a joint venture agreement with Sinopec Shanghai Petrochemical Company (NYSE:SHI).
Devon Energy will receive $2.2 billion in exchange for a 33% interest in the company's New Ventures group. The other four plays in this group include the Niobrara, a Mississippian oil play in the Mid Continent, Utica Shale and the Michigan Basin. (For related reading, see A Guide To Investing In Oil Markets.)
Goodrich Petroleum plans limited spending on natural gas development in 2012, with $60 million allocated to the Haynesville Shale. These funds will be used to complete previously drilled non-operated wells in this play.
The Bottom Line
Goodrich has so far been successful in the company's transition towards oil over the last year. The company's progress here should continue in 2012, helped along by substantial capital directed towards the Eagle Ford Shale.
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.