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anyone follow GDP, Goodrich Petroleum here?


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On the surface this looks like a good short.


-Their long-term track record is very bad in terms of GAAP profits and free cash flow.

-33% of the float is short, which probably means that this is a pretty obvious short.

-It's oil and gas.  This is not a good sector to look for longs.

-They recently had a secondary offering.  Offering price $25.25.  Proceeds to company $24.11375 (before expenses and ignoring share dilution from the call option).


I'm surprised that the stock tanked so hard after the secondary.  Normally investment banks try to support the share price after a secondary.

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The offering was done after the stock doubled in short period of time. Someone got hosed. The raise was due to an excitement regarding their acres in TMS. Some nice results there.


Now, the market is focus on risk and challenges.


Seems another gas to oil play, EV - 1.3B, 30k acres in Eagle Ford, probably worth 400-600million. (13k - 20k per acre). They have other gas assets that they said will keep.


What's interesting is its 300k net acres in TMS, these are 90%+ oil acres, the theory is if they are get TMS to close to Eagle Ford's economics and thus its per acre price. Share price will be multiple of current.


Insider ownership of 20%. They will have announce results from two wells and guidance early Feb.


I have bought in today and will further read up on this when time allows.





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Let me explain: independent oil and gas is a magnet for fraud because insiders can lie about the economics of the company's resources and face no consequences for it.  I don't know of any examples where insiders have been charged with fraud (let alone convicted)... so I would expect fraud to be very high in this sector.


If GDP were to go above $18, I would've shorted the stock and then done actual research on the company.

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