Bookkeeping: New Stake in Natural Gas player Goodrich Petroleum (GDP)

Submitted By Trader Mark
I've built quite a basket of natural gas stocks; unlike coal or fertilizer where I can really break down the industry and pick specific favorites (and there is a limited roster of candidates), there are many many many public natural gas companies. I won't profess to being an industry expert and knowing which of these 50-60 companies is the "true undiscovered value" like I could do in coal or fertilizer. So instead of building large positions in any 1 or 2, I'm spreading my net over a larger pool of fish here.

I do know I want to have more exposure to the Haynesville Shale and today I am adding one of the 4 Haynesville Shale names I've targeted [Jul 9: Haynesville Natural Gas Plays Refuse to Sell Off] ; if I chose the best one is unknowable. Goodrich Petroleum (GDP) is certainly the most expensive on a P/E basis but that is not necessarily the best metric for this product. In that entry I listed 4 stocks, which technically had only fallen to their 20 day moving average and was hoping to see further weakness to begin a stake in at least 1. The very next day the whole group ramped 8-12% across the board. So now we are getting another chance. I've been saying I want to see the natural gas stocks sell off, because they have been the last bastion of strength, even better than fertilizer or coal.

Overall from a "commodity standpoint" we don't have that much in the oil/gas space - a lot of names but not the type of weighting as some other areas. I do think oil is a bit overblown and I don't have much interest in pure oil E&P companies, but do have some interest in natural gas.

So we're starting today off with Goodrich Petroleum (GDP) with 250 shares at just under $66, creating a 1.4% stake, as it pulls back yet again to its 20 day moving average. I'd love to see a move down to the mid $50s near to the 50 day moving average but I said that the last time I talked about these names, and immediately they ran on me. Note - the other 3 names in my target list are also either at or very close to the 20 day moving average so it's a bit of a toss up on which to go into - I chose the 2nd smallest of the 4, and the one that had fallen the most (on % basis) from recent highs. Sort of abstract reasons. (had to sell some short exposure to raise cash for this purchase)

Please note - a lot of bigger players in this space are actually breaking down on their charts as the hedge funds decide it's time to sell off natural gas - we've had enough fun pushing these up ;) On the other hand we were not chasing these names up and buying near the peaks so we are still doing ok in our purchases over the past few months, as we took some off the table on these huge runs in the bigger natural gas names we own.

Despite a very pricey (on P/E ratio) value - this is a $2 Billion market cap company and my thesis in this space is the smaller players might be the better plays since (as we've seen today) the potential for takeover is much higher. Goodrich continues to put out good news. And being in the joint venture with one of the industry's best, can only be good for this small player.

Independent oil and gas explorer Goodrich Petroleum Corp (GDP) said it increased its net Haynesville acreage position in East Texas and closed a previously announced joint venture in Louisiana.
Goodrich currently estimates about 38,500 net acres for the Haynesville Shale in the Minden and Beckville field areas in Panola and Rusk Counties, Texas.
The company also said it drilled and logged two additional vertical Haynesville Shale wells on its 100 percent-owned acreage in the Minden field of Rusk and Panola Counties, Texas.
The company said its recently added net acreage increases its total net exposure in the Haynesville Shale play in Northwest Louisiana and East Texas, excluding the acreage in the Angelina River Trend, to about 60,500 net acres.
Goodrich said it closed its previously announced joint venture to develop the Haynesville Shale in Northwest Louisiana with Chesapeake Energy Corp (CHK) in Caddo and DeSoto Parishes, Louisiana.

Long Goodrich Petroleum in fund; considering for personal position depending on action later in the day