goodrich petroleum corporation - RR DONNELLEY FINANCIAL

have been notified of the State’s approval. We anticipate that we will incur a gradually lower production tax rate
in the future as we add additional Texas qualifying wells to our production base and as reduced rates are
approved.
The Louisiana horizontal wells are eligible for a two year severance tax exemption from the date of first
production or until payout of qualified costs, whichever is first.
Ad valorem taxes decreased $0.9 million to $1.6 million in 2011 from $2.5 million in 2010. Ad valorem tax
is assessed on the value of properties as of the first day of the year and is highly influenced by commodity prices
for the prior several months. The number of properties we owned decreased from January 1, 2010 to January 1,
2011 and the assessed values for our properties were lower year-to-year driven by decreased commodity prices.
Production and other taxes for the year 2010 were $3.6 million which includes production tax of $1.1
million and ad valorem tax of $2.5 million. Production tax in 2010 is net of $1.6 million of tax credits attributed
to Tight Gas Sands (“TGS”) credits for our wells in the State of Texas and $0.4 million severance tax relief
related to the horizontal wells we have drilled in the State of Louisiana. During the year 2009, production and
other taxes were $4.3 million, which included production tax of $1.3 million and ad valorem tax of $3.0 million.
Production tax in 2009 is net of $1.6 million of tax credits attributed to TGS credits for our wells in the State of
Texas and $0.2 million severance tax relief related to the horizontal wells we have drilled in the State of
Louisiana. The lower production tax for 2010 compared to 2009 is attributable to the increasing portion of our
production coming from the Haynesville Shale horizontal wells, which are exempt for two years from State of
Louisiana production tax.
Ad valorem taxes decreased $0.5 million to $2.5 million in 2010 from $3.0 million in 2009. Ad valorem tax
is assessed on the value of properties as of the first day of the year and is highly influenced by commodity prices
for the prior several months. Though the number of properties we owned increased from January 1, 2009 to
January 1, 2010, the assessed values for our properties were lower year-to-year driven by decreased commodity
prices.
Transportation
Transportation expense increased in 2011 compared to 2010. The increase in expense is primarily a result of
higher transportation costs related to our new gas production from the Eagle Ford Shale Trend wells offset by the
cost savings from the sale of non-core properties in December 2010.
Transportation expense in 2010 increased compared 2009. The increase in expense is primarily due to our
higher production volumes and also up slightly due to a contractual annual volume deficiency charge related to
non-core properties while the lower unit costs are a function of our changing geographic production mix, as well
as a greater percentage of sales coming from non-operated properties from which the operator nets the
transportation cost from revenues.
Exploration
The decrease in exploration expenses in 2011 is attributable primarily to a $0.8 million decrease in
exploration labor costs and a $0.6 million decrease in seismic costs. Exploration expense for 2011 includes $5.5
million of amortization of leasehold costs.
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