goodrich petroleum corporation - RR DONNELLEY FINANCIAL

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(“NOL”) position for tax purposes, and if we generate taxable income in future periods, we will be able to use
our NOLs to offset taxes due at that time. The Company will continue to assess the valuation allowance against
deferred tax assets considering all available evidence obtained in future reporting periods.
As of December 31, 2011, we have NOL carry-forwards of approximately $380.7 million for tax purposes
which begin to expire in 2026. The Company also has an alternative minimum tax credit carry-forward not
subject to expiration of $1.2 million which will not begin to be used until after the available NOLs have been
used or expired and when regular tax exceeds the current year alternative minimum tax.
The amount of unrecognized tax benefits did not materially change as of December 31, 2011. The amount of
unrecognized tax benefits may change in the next twelve months; however we do not expect the change to have a
significant impact on our results of operations or our financial position. We file a consolidated federal income tax
return in the United States and various combined and separate filings in several state and local jurisdictions. With
limited exceptions, we are no longer subject to U.S. Federal, state and local, or non-U.S. income tax
examinations by tax authorities for years before 1992.
Our continuing practice is to recognize estimated interest and penalties related to potential underpayment on
any unrecognized tax benefits as a component of income tax expense in the Consolidated Statement of
Operations. We do not anticipate that total unrecognized tax benefits will significantly change due to the
settlement of audits and the expiration of statute of limitations before December 31, 2012.
NOTE 7—Stockholders’ Equity
Share Lending Agreement
In connection with the offering of our 3.25% in December 2006, we lent an affiliate of Bear, Stearns & Co.
(“BSC”) a total of 3,122,263 shares of our common stock under the Share Lending Agreement. On March 20,
2008, BSC returned 1,497,963 shares of the 3,122,263 originally borrowed shares and fully collateralized the
remaining 1,624,300 borrowed shares with a cash collateral deposit of approximately $41.3 million.
In conjunction with the partial repurchase of our 2026 Notes in March 2011, the Share Lending Agreement
was terminated and JP Morgan Chase & Co. (successor to BSC) returned the remaining 1,624,300 shares. The
shares returned to us were recorded as treasury shares and retired in March 2011.
Capped Call Option Transactions
On December 10, 2007, we closed the public offering of 6,430,750 shares of our common stock at a price of
$23.50 per share. Net proceeds from the offering were approximately $145.4 million after deducting the
underwriters’ discount and estimated offering expenses. We used approximately $123.8 million of the net
proceeds to pay off outstanding borrowings under our senior credit facility, and approximately $21.6 million of
the net proceeds to purchase capped call options on shares of our common stock from affiliates of BSC and
J.P. Morgan Securities Inc.
The capped call option agreements were separate transactions entered into by us with the option
counterparties and was not part of the offering of common stock. The capped call option transactions covered,
subject to customary anti-dilution adjustments, approximately 5.8 million shares of our common stock, and each
of them was divided into a number of tranches with differing expiration dates. Approximately 77,333 options per
trading day expired over each of three separate 25 consecutive trading day settlement periods. During 2009,
two-thirds of the options expired. The remaining one-third of the options subject to the capped call expired in
May and June 2010 and did not result in our receipt of any shares of common stock.
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