Summary

• Gulfport Energy Corporation (NYSE:GPOR) is an independent exploration and production company with a primary emphasis on natural gas resources. The company's assets are strategically located in the prolific Appalachia and Anadarko basins.
• The company caters to various customers, including refineries, re-sellers such as marketers, and other end users. Natural gas and NGL production are typically sold to purchasers through both spot and term transactions.
• Gulfport filed voluntary petitions for Chapter 11 bankruptcy on November 13, 2020, in the United States Bankruptcy Court for the Southern District of Texas. The court confirmed the restructuring plan on April 28, 2021, and the company emerged from Chapter 11 May 18, 2021.
• In 2022, the company experienced significant growth in sales, with total sales reaching $1,331 million. This marked an increase of $522.23 million or 64.6% compared to the sales figure of $808.77 million in 2021.
• The company's operating profit for 2022 amounted to $543 million, reflecting a positive difference of $616.58 million or 839.5% from the operating loss of $-73.58 million in the previous year, 2021.
• The net profit for the year 2022 was $412.86 million, representing a notable increase of $278.86 million or 207.9% compared to the net profit of $134 million in 2021.
• Moreover, the diluted earnings per share (EPS) for 2022 were reported as $20.45, showing a substantial increase of $13.95 or 214.6% compared to the diluted EPS of $6.50 in 2021.

Brief Company Overview

Gulfport Energy Corporation (NYSE:GPOR) is an independent exploration and production company with a primary emphasis on natural gas resources. The company's assets are strategically located in the prolific Appalachia and Anadarko basins. In eastern Ohio, Gulfport's principal properties are dedicated to the targeted development of the Utica formation, while in central Oklahoma, the focus extends to the SCOOP Woodford and Springer formations. The corporate headquarters are situated in Oklahoma City, Oklahoma, and Gulfport's Common Stock is traded on the New York Stock Exchange. Gulfport's corporate strategy centers around the economic development of its asset base, aiming to generate sustainable free cash flow. As of December 31, 2022, Gulfport boasted 4.0 trillion cubic feet equivalent (Tcfe) of proved reserves, reflecting a Standardized Measure of $8.3 billion and a PV-10 of $9.5 billion. The company's core mission is the exploration, acquisition, and production of natural gas, crude oil, and natural gas liquids (NGL) throughout the United States, with operational focus on the Appalachia and Anadarko basins.

The primary function of Gulfport's operations includes supplying and facilitating natural gas, oil, and natural gas liquids (NGL). The company caters to various customers, including refineries, re-sellers such as marketers, and other end users. Natural gas and NGL production are typically sold to purchasers through both spot and term transactions. Similarly, oil production is marketed through a combination of spot and term transactions, with a prevalence of shorter-term sales contracts. To ensure a consistent supply, Gulfport has strategically entered into long-term gathering, processing, and transportation contracts with various parties. These agreements reserve capacity for fixed and determinable quantities of production over specified periods.

As of November 2023, the company had a 52-week share price range of $60.15 to $134.84. The trailing P/E ratio of the company is 1.51 times, the price-to-sales ratio (ttm) is 1.91 times, the profit margin is 151.45%, the operating margin is 30.35%, the return on assets (ttm) is 32.42%, the return on equity is 181.07%, and the diluted earnings per share (ttm) is $87.99. The aggregate market value of common stock held by non-affiliates on June 30, 2022 was approximately $ 911.7 million. As of February 23, 2023, there were 18,847,841 shares of $0.0001 par value common stock outstanding.

Recent Developments

• During the quarter, Gulfport completed and turned 13 gross wells to sales, including 11 in the Utica and 2 in the SCOOP. It also commenced drilling on Marcellus delineation test in Belmont County, Ohio and plans to turn to sales in the fourth quarter of the year.¹
• In September 20, 2023 Gulfport Energy Corporation has announced a 63% expansion of its common stock repurchase authorization to $650 million, extending the program through December 31, 2024. The expanded repurchase authorization reflects confidence in the company's value and aims to deliver significant value to shareholders, leveraging available funds for opportunistic share repurchases. The program's execution will consider market conditions, legal requirements, and other relevant factors.²

Recent Financing Activities

• Gulfport repurchased approximately 441.5 thousand shares of common stock during the second quarter of 2023 at an average price of $93.67.³
• On May 1, 2023, the Company entered into that certain Joinder, Commitment Increase and Borrowing Base Redetermination Agreement, and Third Amendment to Credit Agreement (the “Third Amendment”) which amended the Company’s Existing Credit Facility (as amended, the “Credit Facility”). The Third Amendment, among other things, (a) increased the aggregate elected commitment amounts under the Credit Facility from $700 million to $900 million, (b) increased the borrowing base under the Credit Facility from $1 billion to $1.1 billion, (c) increased the excess cash threshold under the Credit Facility from $45 million to $75 million, and (d) extended the maturity date under the Credit Facility from October 14, 2025 to the earlier of  May 1, 2027 and (ii) the 91st day prior to the maturity date of the 2026 Senior Notes or any other permitted senior notes or any permitted refinancing debt under the Credit Facility having an aggregate outstanding principal amount equal to or exceeding $100 million; provided that such notes have not been refinanced, redeemed or repaid in full on or prior to such 91st day.⁴

Financial Performance Highlights

Q2 2023 Highlights

In the third quarter of 2023, the company reported sales of $227 million, indicating an increase of $19.08 million or 9.2% compared to the third quarter of 2022, which had sales of $207.92 million. The net profit for the third quarter of 2023 was $517.55 million, showing an impressive increase of $439.55 million or 562.6% when compared to the net profit of $78 million in the third quarter of 2022. Furthermore, the company's diluted earnings per share (EPS) for the third quarter of 2023 increased to $27.37, a substantial positive change of $23.19 or 554.5% compared to the diluted EPS of $4.18 in the third quarter of 2022.

Annual Performance Highlights

In 2022, the company experienced significant growth in sales, with total sales reaching $1,331 million. This marked an increase of $522.23 million or 64.6% compared to the sales figure of $808.77 million in 2021. The company's operating profit for 2022 amounted to $543 million, reflecting a positive difference of $616.58 million or 839.5% from the operating loss of $73.58 million in the previous year, 2021. The net profit for the year 2022 was $412.86 million, representing a notable increase of $278.86 million or 207.9% compared to the net profit of $134 million in 2021. Moreover, the diluted earnings per share (EPS) for 2022 were reported as $20.45, showing a substantial increase of $13.95 or 214.6% compared to the diluted EPS of $6.50 in 2021.

For the year ended December 31, 2022, total unhedged natural gas, oil and condensate and NGL revenues increased approximately compared to the Prior Successor Period. The increase was primarily driven by the timing of emergence from bankruptcy. The Prior Successor Period only includes production from May 18, 2021, through December 31, 2021, compared to a full year of production in 2022. Additionally, as noted in the table above, significant increases in oil, natural gas and NGL indexes increased per unit realizations. Most notably, the Henry Hub index increased from $4.28 per MMBtu in the Prior Successor Period to $6.44 per MMBtu in 2022.

Operating Activities: Net cash provided by operating activities. Net cash provided by operating activities was $739.1 million for the year ended December 31, 2022, compared to $293.0 million for the Prior Successor Period and $172.2 million for the Prior Predecessor Period. These increases were primarily the result of an increase in cash receipts from our oil and natural gas purchasers due to the significant increases in net natural gas, oil and NGL sales, excluding the impact of derivatives.

Investing Activities: In 2022, cash flows from investing activities amounted to a net usage of $458.3 million, reflecting significant expenditures in the form of additions to oil and natural gas properties, totaling $460.8 million. This represented a substantial increase from the $207.1 million invested in the same category in 2021. Partially offsetting this, the company generated $3.4 million from the sale of oil and natural gas properties. Other net activities resulted in an additional cash outflow of $0.9 million. Comparatively, in 2021, the net cash used in investing activities amounted to $200.1 million. This included $207.1 million directed towards additions to oil and natural gas properties, a higher figure than the $4.3 million generated from the sale of such properties. Other net activities contributed positively with $2.7 million.

Financing Activities: In 2022, cash flows from financing activities resulted in a net usage of $276.8 million. This was influenced by principal payments on the Exit Credit Facility totaling $709.0 million and principal payments on the Credit Facility amounting to $2,082.0 million. Offsetting these, there were borrowings on the Credit Facility of $2,063.0 million and other activities, including the repurchase of Common Stock under the Repurchase Program at a cost of $250.5 million. In comparison, in 2021, cash flows from financing activities amounted to a net usage of $149.0 million. Key contributors to this were principal payments on the Exit Credit Facility ($709.0 million), principal payments on the Credit Facility ($477.0 million), and debt issuance costs and loan commitment fees ($8.8 million). Partially offsetting these were borrowings on the Exit Credit Facility ($406.3 million) and borrowings on the Credit Facility ($641.0 million).

Business Overview

Gulfport is an independent natural gas-weighted exploration and production company with assets primarily situated in the Ohio and in central Oklahoma. The company's focus is on economically developing its asset base. In its operating areas, Gulfport is strategically positioned in key hydrocarbon-rich formations in the United States. The company's reserves estimation process involves subjective engineering, dependent on available data, geological interpretation, and variable assumptions, emphasizing the inherent variability in such estimates. We will see the major operation in the following section:

Utica: The Utica covers hydrocarbon-bearing rock formations located in the Appalachian Basin of the United States and Canada. With approximately 188,000 net reservoir acres, it is primarily situated in Belmont, Harrison, Jefferson, and Monroe Counties in eastern Ohio, where the Utica ranges in thickness from 600 to over 750 feet. In 2022, production reached approximately 693 MMcfe per day, constituting around 70% of the total production in this area. The Marcellus involves hydrocarbon-bearing rock formations that overlay the Utica. Identified reservoir acres for Marcellus development in Belmont County, eastern Ohio, and amount to 15,000. In 2022, 8 PUD Marcellus locations were added within the Utica operating area, with the Marcellus development area being 3,500 to 4,500 feet shallower than the Utica.

SCOOP: The SCOOP is a defined area encompassing key hydrocarbon-producing counties in Oklahoma within the Anadarko Basin. Targeting the Devonian to Mississippian-aged Woodford, Sycamore, and Springer formations, it holds approximately 73,000 net reservoir acres, with around 41,000 in the Woodford formation and 32,000 in the Springer formation. The Woodford Shale across this position ranges in thickness from 200 to over 400 feet, directly overlying the Hunton Limestone and underlying the Sycamore formation, both locally productive reservoirs. The Sycamore formation consists of hydrocarbon-bearing interbedded shales and siliceous limestones, ranging in thickness from 150 to over 450 feet, overlain by the Caney Shale. The Springer formation is comprised of a series of lenticular sand and shale units, with primary targets being porous, low clay, and organic-rich packages within the Goddard Shale member, ranging in thickness from 50 to over 250 feet. In 2022, SCOOP production reached approximately 290 MMcfe per day, constituting approximately 30% of the total production in this area.

Product and revenue from these operations (Oil, Natural Gas, and NGL Reserves): Reserve engineering is a subjective process of estimating volumes of economically recoverable oil, natural gas, and NGL that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation. As a result, the reserve estimates of different engineers often vary. In addition, the results of drilling, testing, and production may justify revisions of such estimates. Accordingly, reserve estimates often differ from the quantities of oil and natural gas that are ultimately recovered. Estimates of economically recoverable oil and natural gas and of future net revenues are based on a number of variables and assumptions, all of which may vary from actual results, including geologic interpretation, prices, and future production rates and costs. Here is the information of operation from last year.

Natural Gas (MMcf/day): Natural gas is a fossil fuel primarily composed of methane, extracted from underground reservoirs. It is a versatile energy source used for electricity generation, heating, and as a fuel for various industrial processes. Gulfport's production volumes in the Utica and SCOOP formations refer to the amount of natural gas extracted per day.

• Utica Production Volumes (MMcf/day): In 2022, Gulfport's Utica production volumes reached 674 MMcf/day, reflecting the daily quantity of natural gas extracted from the Utica formation.
• SCOOP Production Volumes (MMcf/day): The SCOOP production volumes amounted to 209 MMcf/day in the same period, representing the daily natural gas extraction from the SCOOP Woodford and Springer formations.

Oil and Condensate (MBbl/day): Oil and condensate are hydrocarbons extracted from reservoirs and are key components in the production of various fuels and petrochemicals. Gulfport's production volumes in the Utica and SCOOP formations represent the daily quantity of oil and condensate extracted.

• Utica Production Volumes (MBbl/day): In 2022, Gulfport's Utica production volumes for oil and condensate were 1 MBbl/day.
• SCOOP Production Volumes (MBbl/day): SCOOP production volumes for oil and condensate reached 4 MBbl/day in the same period.

NGL (MBbl/day): Natural Gas Liquids (NGL) are hydrocarbons that exist in a gaseous state underground but are extracted in liquid form. They include components like ethane, propane, butane, and pentane. Gulfport's production volumes in the Utica and SCOOP formations represent the daily quantity of NGL extracted.

• Utica Production Volumes (MBbl/day): In 2022, Gulfport's Utica production volumes for NGL were 2 MBbl/day.
• SCOOP Production Volumes (MBbl/day): SCOOP production volumes for NGL reached 10 MBbl/day in the same period.

Other Business Information

Gulfport Energy Corporation filed voluntary petitions for Chapter 11 bankruptcy on November 13, 2020, in the United States Bankruptcy Court for the Southern District of Texas. The court confirmed the restructuring plan on April 28, 2021, and the company emerged from Chapter 11 on the Emergence Date, starting to trade on the NYSE under the symbol "GPOR" on May 18, 2021. Prior to emergence, on November 14, 2020, Gulfport announced a Restructuring Support Agreement (RSA) with key lenders and noteholders, commencing a voluntary Chapter 11 process. The RSA outlined a pre-arranged Plan of Reorganization to reduce debt by approximately $1.25 billion and improve the cost structure. Gulfport obtained a commitment for $105 million in new money debtor-in-possession financing to support ongoing operations during the restructuring. The company aimed to eliminate debt, lower operational costs, and achieve a sustainable capital structure. The leadership, led by David M. Wood, President and CEO, expressed gratitude for stakeholder support, acknowledging the need for a Chapter 11 process to address unsustainable financial conditions. Gulfport's intention was to emerge from Chapter 11 with reduced leverage and an enhanced ability to generate cash flow. The company filed customary "first day" motions to maintain ordinary business operations during the restructuring, seeking court authorization for various relief measures.  

Company History

Founding and Early Years (1997-1998): Founded in July 1997 and headquartered in Oklahoma City, Oklahoma, Gulfport Energy Corporation embarked on its journey as an independent oil and natural gas exploration and production company. The early years were marked by strategic acquisitions, including a 50% working interest in the West Cote Blanche Bay (WCBB) field, positioning the company for focused growth.

Low Risk Development (1998-2005): During this phase, Gulfport Energy prioritized low-risk development activities, particularly in the WCBB field. The company's commitment to growth and cash flow was underscored by successful drilling initiatives and the utilization of advanced technologies like 3-D seismic data reprocessing.

Expansion/Diversification (2005-2007): Building on its success, Gulfport continued to expand and diversify its portfolio. The focus remained on the WCBB field, complemented by exploratory drilling in the Hackberry field. Additionally, the company strategically entered the Canadian Oil Sands and acquired an interest in the Phu Horm natural gas field in Thailand.

Resource Play Addition (2007-2012): This pivotal phase saw Gulfport strategically adding resource plays to its portfolio. Acquiring acreage in the Permian Basin and expanding positions in Thai natural gas fields, the company also secured a substantial presence in the core of the Utica Shale, positioning itself as an early entrant with a strategic advantage.

Resource Development (2012-Today): Entering the current phase in 2012, Gulfport Energy actively developed its Utica Shale resource through a comprehensive drilling program. In a strategic move, the company contributed to the IPOs of Diamondback Energy, Inc. and Mammoth Energy Services, Inc., solidifying its position in the market. Ongoing commitment to resource development was evident through the acquisition of assets in the SCOOP play.

Leadership: The leadership team at Gulfport, including Chairman Mike Liddel, CEO James Palm, Senior Vice President and CFO Michael G. Moore, Geological & Geophysical Manager Stuart Maier, and Geologist/Geophysicist Randy Wilson, played a crucial role in steering the company through its various phases of growth.

Financial Overview (As of January 2022): Gulfport Energy's financial landscape as of January 2022 depicted a robust industry presence. Operating in the Oil & Energy sector, the company reported a revenue of $1.3 billion with a workforce of 256 employees. Gulfport maintained its headquarters in Oklahoma City, operating as a publicly traded entity.

Current Focus (As of January 2022): Gulfport Energy's current focus revolves around oil and natural gas exploration and production, with a strategic emphasis on the Utica Shale and the SCOOP play. The company remains actively engaged in drilling operations, strategic acquisitions, and ongoing development activities to enhance its asset base and production capabilities.

References

1. ^ https://www.okenergytoday.com/2023/08/gulfport-beats-2qexpectations-and-plans-more-drilling-efforts/
2. ^ https://www.gulfportenergy.com/news/press-releases/detail/1394/gulfport-energy-expands-common-stock-repurchase
3. ^ https://go.gale.com/ps/i.do?p=AONE&u=anon~492803e0&id=GALE|A759522962&v=2.1&it=r&sid=sitemap&asid=6c4b4fbb
4. ^ https://www.gulfportenergy.com/investors/sec-filings/all-sec-filings/xbrl_doc_only/13340