MKM Sees Significant Upside In Goodrich Petroleum Corporation (GDP)

MKM Partners sees significant upside in shares of Goodrich Petroleum Corporation GDP. It has a Buy rating and a $22 price target on shares. In a research note, MKM notes, "Although 3Q10 results included a pushout of production and a sizeable, $223.3 million impairment charge, we remain enthusiastic and constructive with regard to the upside potential of GDP shares. Despite 3Q10 production of 91.7 Mmcfepd falling short of our 96.5 Mmcfepd estimate and guidance for 94-98 Mmcfepd, EPS/CFPS of ($0.22)/$0.64 was within range of our ($0.19)/$0.68 estimates. As the production shortfall related to wells drilled, but not completed, early 2011 should exhibit solid growth as these wells come on line. Our $22 target price is based on a long-term DCF model that incorporates a 5% terminal decline rate and a 12.5% weighted-average cost of capital. Our target price represents 6.5x and 5.0x our respective 2010 and 2011 CFPS estimates of $3.37 and $4.41." Shares of GDP gained 46 cents yesterday to close at $12.97.