SunTrust Robinson Humphrey Upgrades Goodrich Petroleum (GDP) to Neutral
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SunTrust Robinson Humphrey upgrades Goodrich Petroleum (NYSE: GDP) from Reduce to Neutral and raises their price target from $40 to $48.
The firm cited an "almost 10% improvement in capital productivity associated with Haynesville shale development and an approximate $100 million per annum increase in capital spending partly offset by a lower gas price realization" as the reason for the price target increase. Therefore, the increased price target, along with recent depreciation in the share price, justifies their upgrade to Neutral.
SunTrust Robinson Humphrey highlighted that the company has a Haynesville shale leasehold of 22,000 net acres in North Louisiana and 39,000 acre in East Texas. The firm also highlighted that “preliminarily industry horizontal Haynesville shale wells suggest 4+ Bcfe of reserve recovery for a drill/complete cost of +$7 million.” This is superior to vertical development of the Cotton Valley sands.
In relation to the company's 2009 preliminary capital budget, which contemplates $450 million of expenditures, the firm says that $100 million will be allocated toward the Chesapeake Energy (NYSE: CHK) joint venture and another $100 million to non-joint venture lands. Therefore, the firm said, "This level of capital spending would represent +25 Chesapeake joint venture wells and +15 non-joint venture Haynesville shale wells."
Goodrich Petroleum Corporation, an independent oil and gas company, together with its subsidiaries, engages in the exploration, exploitation, development, and production of oil and natural gas properties in the Cotton Valley trend of East Texas and Northwest Louisiana.
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