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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2004

Or

For the transition period from              to             

Commission File Number: 1-7940

Goodrich Petroleum Corporation

(Exact name of registrant as specified in its charter)

808 Travis Street, Suite 1320, Houston, Texas 77002

(Address of principal executive offices) (Zip Code)

(713) 780-9494

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

At November, 10, 2004, there were 20,509,935 shares of Goodrich Petroleum Corporation common stock outstanding.

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GOODRICH PETROLEUM CORPORATION

INDEX TO FORM 10-Q

September 30, 2004

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

See notes to consolidated financial statements.

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets (Continued)

See notes to consolidated financial statements.

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

See notes to consolidated financial statements.

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

See notes to consolidated financial statements.

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

See notes to consolidated financial statements.

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity and Comprehensive Income

Nine Months Ended September 30, 2004 and 2003

(Unaudited)

See notes to consolidated financial statements.

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2004 and 2003

(Unaudited)

NOTE A - Basis of Presentation

The consolidated financial statements of Goodrich Petroleum Corporation (“Goodrich” or “the Company”) included in this Form 10-Q have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and, accordingly, certain information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States has been condensed or omitted. The consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation.

The accompanying consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

The results of operations for the nine-month period ended September 30, 2004 are not necessarily indicative of the results to be expected for the full year.

Income Taxes

The Company follows the asset and liability method of accounting for deferred income taxes prescribed by SFAS No. 109, “Accounting for Income Taxes”. The statement provides for the recognition of a deferred tax asset for deductible temporary timing differences, capital and operating loss carryforwards, statutory depletion carryforward and tax credit carryforwards, net of a “valuation allowance”. The valuation allowance is provided for that portion of the asset for which it is deemed more likely than not that it will not be realized.

As discussed in Note F of the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, the Company established a deferred tax valuation allowance of $17.5 million as of December 31, 2003. The Company revised its deferred tax valuation allowance in the nine months ended September 30, 2004 in the amount of $3,106,000, based on the anticipated reversal of temporary differences and utilization of tax operating loss carryforwards.

Restatement of 2003 Financial Statements

In the course of preparing its 2003 year-end financial statements, the Company discovered a systematic error in the calculations of its non-cash depletion, depreciation and amortization expense since 1997. Essentially, the Company had been allocating the acquisition and development costs of its oil and gas properties over total proved reserves in each field rather than segregating the costs between those costs to be allocated over proved developed reserves versus those costs to be allocated over total proved reserves. Accordingly, the Company has restated its previously reported depletion, depreciation and amortization expense for the three months and nine months ended September 30, 2003. Such restated amounts reflect reallocations of the purchase price of three oil and gas property acquisitions completed prior to January 1, 2001, based upon analyses of contemporaneous documentation from the time of the acquisitions. The tax-effected amounts of the adjustments resulted in changes in the Company’s previously reported Statement of Operations as follows:

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The tax-adjusted cumulative effect of the error on non-cash depletion, depreciation and amortization expense in years prior to December 31, 2002 resulted in a reduction of stockholders’ equity as of January 1, 2003 in the amount of $2,199,077. The restatement adjustments had no impact on cash flow from operating, investing or financing activities.

NOTE B – New Accounting Pronouncements

Effective January 1, 2003, the Company adopted SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 requires the Company to record a liability equal to the fair value of the estimated cost to retire an asset. The asset retirement liability must be recorded in the periods in which the obligation meets the definition of a liability, which is generally when the asset is placed in service. Prior to the adoption of SFAS No. 143, the Company recorded liabilities for the abandonment of oil and gas properties only in its two largest fields, with such liabilities amounting to $4,881,000 as of December 31, 2002. In accordance with the transition provisions of SFAS No. 143, the Company recorded an adjustment to recognize additional estimated liabilities for the abandonment of oil and gas properties, as of January 1, 2003, in the amount of $1,408,000, and additional oil and gas properties, net of accumulated depletion, depreciation and amortization, in the amount of $1,092,000. Any subsequent difference between costs incurred upon settlement of an asset retirement obligation and the recorded liability will be recognized as a gain or loss in the Company’s earnings. To recognize the cumulative effect of this change in accounting principle, the Company recorded a charge to earnings as of January 1, 2003 in the amount of $205,000, reflecting the $316,000 difference between the adjustments to the liability and asset accounts, net of the related income tax effect. For the nine months ended September 30, 2004 and 2003, the Company recorded the following activity in the abandonment liability:

In March 2004, the FASB issued an exposure draft on accounting for stock-based compensation. The exposure draft reflects the FASB’s tentative conclusion that the fair value of stock options should be expensed in companies’ financial statements for years ending after December 31, 2004. In October 2004, the FASB announced that it would defer the effective date for the expensing of stock options as proposed in the exposure draft for at least six months. The Company will continue to monitor developments with respect to the exposure draft to determine the potential impact on its financial statements.

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NOTE C – Senior Credit Facility

On November 9, 2001, the Company established a three-year $50,000,000 senior credit facility with BNP Paribas, with an initial borrowing base of $25,000,000. In December 2003, the borrowing base was redetermined to be $28,000,000 and BNP Paribas and the Company agreed to extend the term of the senior credit facility to December 29, 2006, subject to periodic redeterminations of the borrowing base. In August 2004, the borrowing base was redetermined to be $32,000,000. Borrowings outstanding under the senior credit facility as of September 30, 2004 were $25,500,000.

Interest on borrowings under the senior credit facility accrue at a rate calculated, at the option of the Company, at either the BNP Paribas base rate plus 0.00% to 0.50%, or LIBOR plus 1.50%—2.50%, depending on borrowing base utilization. Interest on LIBOR-rate borrowings is due and payable on the last day of its respective interest period. Accrued interest on each base-rate borrowing is due and payable on the last day of each quarter. The credit facility requires that the Company pay a 0.375% per annum commitment fee, payable in quarterly installments based on the Company’s borrowing base utilization. Prior to maturity, no payments are required so long as the maximum borrowing base amount exceeds the amounts outstanding under the credit facility. The credit facility requires the Company to monitor tangible net worth and maintain certain financial statement ratios at certain levels. As of September 30, 2004, the Company was in compliance with all such requirements. Substantially all the Company’s assets are pledged to secure the senior credit facility.

As indicated in Note D, the Company entered into three separate interest rate swaps with BNP Paribas in February 2003, covering a three year period commencing in February 2003, and in February 2004, the Company entered into another interest rate swap with BNP Paribas, covering a one year period commencing in February 2006.

NOTE D – Hedging Activities

The Company utilizes commodity hedges in the form of fixed price swaps, whereby the Company receives a fixed price and pays a floating price based on NYMEX quoted prices. As of September 30, 2004, the Company’s open forward position on its outstanding natural gas and crude oil hedging contracts, all of which were with BNP Paribas, were as follows:

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The fair value of the natural gas and oil hedging contracts in place at September 30, 2004, resulted in a liability of $7,646,095. As of September 30, 2004, $4,281,073 (net of $2,305,193 in income taxes) of deferred losses on derivative instruments accumulated in other comprehensive income are expected to be reclassified into earnings during the next twelve months. In the nine months ended September 30, 2004, $3,306,950 in realized losses was reclassified from accumulated other comprehensive income to oil and gas sales as the cash flow of the hedged items was recognized. For nine months ended September 30, 2004 and 2003, the Company’s earnings were not materially affected by cash flow hedging ineffectiveness arising from the oil and gas hedging contracts. Subsequent to September 30, 2004, the Company entered into the following natural gas hedging contracts with BNP Paribas:

2,000 MMBtu per day “swap” at fixed price of $8.14 for January 2005 through March 2005;

3,000 MMBtu per day “swap” at fixed price of $6.55 for April 2005 through June 2005;

3,000 MMBtu per day “swap” at fixed price of $6.50 for July 2005 through September 2005;

3,000 MMBtu per day “swap” at fixed price of $6.75 for October 2005 through December 2005

Interest Rate Swaps

The Company has a variable-rate debt obligation that exposes the Company to the effects of changes in interest rates. To partially reduce its exposure to interest rate risk, the Company entered into three separate interest rate swaps with BNP Paribas in February 2003 covering a three year period which are designated as cash flow hedges (one of the interest rate swaps has now expired). The first interest rate swap, which had an effective date of February 26, 2003, expired on its maturity date of February 26, 2004, and was for $18,000,000 with a LIBOR swap rate of 1.53%. The second interest rate swap, which has an effective date of February 26, 2004 and a maturity date of November 8, 2004, is for $18,000,000 with a LIBOR swap rate of 2.25%. The third interest rate swap, which has an effective date of November 8, 2004 and a maturity date of February 26, 2006, is for $18,000,000 with a LIBOR swap rate of 3.46%. In February 2004, the Company entered into a fourth interest rate swap contract with BNP Paribas, which has an effective date of February 26, 2006 and a maturity date of February 26, 2007, for $23,000,000 with a LIBOR swap rate of 4.08%. The fair value of the interest rate swap contracts in place at September 30, 2004, resulted in a liability of $301,502. As of September 30, 2004, $95,703 (net of $51,333 in income taxes) of deferred losses on derivative instruments accumulated in other comprehensive income are expected to be reclassified into earnings during the next twelve months. In the nine months ended September 30, 2004, $107,258 of previously deferred losses was reclassified from accumulated other comprehensive income to interest expense as the cash flow of the hedged items was recognized. For the nine months ended September 30, 2004 and 2003, the Company’s earnings were not significantly affected by cash flow hedging ineffectiveness of interest rates.

NOTE E – Net Income Per Share

Net income was used as the numerator in computing basic and diluted income per common share for the three months and nine months ended September 30, 2004 and 2003. The following table reconciles the weighted-average shares outstanding used for these computations.

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The computation of earnings per share for the three months and nine months ended September 30, 2004 and 2003 considered exercisable stock warrants, stock options and restricted stock to the extent that the exercise of such securities would have been dilutive, however, such computation did not consider preferred stock which is convertible into shares of common stock because the effect of such conversion would have been antidilutive. Pursuant to a May 2003 stock purchase agreement, the holders of 2,369,527 warrants to purchase common stock elected a cashless exercise of such warrants resulting in the issuance of 2,109,169 shares of common stock in three separate installments which closed in January, April, and July 2004. There are no further exercises of warrants to be made pursuant to the stock purchase agreement (see Note G).

In February 2003, the Company issued 125,157 shares of its common stock to employees holding 1,016,500 outstanding stock options in exchange for the cancellation of such options (at the time of cancellation, the options were antidilutive). Based on the value of the Company’s common stock at the time of the exchange, the Company recorded a non-cash charge to earnings in February 2003 in the amount of $403,000 related to the issuance of shares in lieu of cancelled options. At the same time, the Company commenced granting a series of restricted share awards, with three year vesting periods, to its employees under a stockholder approved equity compensation plan. Based on the value of the Company’s common stock at the time of the grants, those awards resulted in charges to a contra equity account and credits to additional paid-in capital in the following amounts:

The charges to the contra equity account are being amortized to earnings as non-cash charges to general and administrative expenses over the three year vesting period of each restricted share award and resulted in non-cash charges to earnings of $110,000 in the nine months ended September 30, 2003 and $407,000 in the nine months ended September 30, 2004. In the nine months ended September 30, 2004, the Company recorded a credit to the contra equity account and a charge to additional paid-in capital in the amount of $158,000 for the value of 28,918 non-vested restricted share awards that were forfeited by terminated employees. The amortization to earnings of restricted share awards has been adjusted to reflect such forfeitures. Assuming no additional restricted share awards or forfeitures, the Company will be required to record recurring non-cash charges to earnings of approximately $145,000 per quarter, related to the periodic vesting of the restricted share awards that have been issued to date.

The Company applies APB Opinion No. 25 in accounting for its stock compensation plans and, accordingly, no compensation cost has been recognized for its stock options in the financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, net income for the three months and nine months ended September 30, 2004 and 2003 would have been reduced to the pro forma amounts indicated below.

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