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Gulfport Energy Second Quarter 2020 Results

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Gulfport Energy Corp. reported its Q2 2020 results and provided an update on its 2020 activities. 

Key highlights are as follows:

• Continued improvement in well costs with Utica Shale and SCOOP total costs per lateral foot for the six-month period declining by 18% and 31%, respectively, versus full year 2019 levels
• Reported net loss of $561.1 million, or $3.51 per diluted share for the second quarter
• Reported adjusted net income (non-GAAP) of $47.1 million, or $0.29 per diluted share for the second quarter
• Generated adjusted EBITDA (non-GAAP) of $145.0 million for the second quarter
• Reported cash provided by operating activities of $116.4 million for the second quarter
• Generated operating cash flow (non-GAAP), excluding working capital changes, of $97.9 million for the second quarter
• Generated free cash flow (non-GAAP) of $43.9 million for the second quarter

2020 Capital Expenditures

The Company's incurred capital expenditures during the second quarter of 2020 benefited from continued improvement in drilling and completions operations, efficiency gains and lower service costs. During the second quarter of 2020, Gulfport's incurred total capital expenditures were $54.0 million. Gulfport’s incurred total capital expenditures includes approximately $51.7 million of drilling and completion (“D&C”) capital expenditures and $2.3 million of land capital expenditures.

For the six-month period ended June 30, 2020, Gulfport's incurred total capital expenditures were $189.3 million. Gulfport’s incurred total capital expenditures includes approximately $182.5 million of D&C capital expenditures and $6.8 million of land capital expenditures. 

2020 Operational Update

As a result of the current commodity price environment, during the second quarter of 2020 Gulfport made the strategic decision to defer near-term production to later periods in 2020 and early 2021, when natural gas prices are expected to be higher. In addition, Gulfport now plans to complete an additional 7 gross wells in the Utica Shale in the second half of 2020. This additional activity provides incremental production late this year and into early 2021 in the anticipation of higher prices during the winter months. Gulfport expects minimal impact to full year 2020 production levels from this activity and reaffirms its 2020 full year net production to average 1,000 MMcfe to 1,075 MMcfe per day. In addition, based on current pricing levels, Gulfport forecasts its third quarter of 2020 production to average approximately 980 MMcfe to 1,030 MMcfe per day.

Efficient operations and continued improvements in drilling and completions costs allows Gulfport to add this incremental activity projecting 2020 total capital expenditures to be at the low-end of the previously provided range of $285 million to $310 million.

Balance Sheet and Liquidity

As of June 30, 2020, the Company’s liquidity totaled approximately $255.7 million, comprised of the $700 million borrowing base plus approximately $2.8 million in cash on hand less $324.1 million outstanding letters of credit and $123.0 million of revolver draw.

Production and Realized Prices

Gulfport’s net daily production for the second quarter of 2020 averaged approximately 1,027 MMcfe per day. For the second quarter of 2020, Gulfport’s net daily production mix was comprised of approximately 91% natural gas, 6% natural gas liquids ("NGL") and 3% oil. For the three-month period ended June 30, 2020, key realized price highlights are as follows:

• Realized natural gas price, before the impact of derivatives and including transportation costs, averaged $1.02 per Mcf, a $0.70 per Mcf differential to the average trade month NYMEX settled price
• Realized oil price, before the impact of derivatives and including transportation costs, averaged $20.14 per barrel, a $7.71 per barrel differential to the average WTI oil price
• Realized natural gas liquids, before the impact of derivatives and including transportation costs, averaged $0.25 per gallon, equivalent to $10.29 per barrel, or approximately 37% of the average WTI oil price

For the six-month period ended June 30, 2020, key realized price highlights are as follows:

• Realized natural gas price, before the impact of derivatives and including transportation costs, averaged $1.14 per Mcf, a $0.70 per Mcf differential to the average trade month NYMEX settled price
• Realized oil price, before the impact of derivatives and including transportation costs, averaged $33.26 per barrel, a $3.71 per barrel differential to the average WTI oil price
• Realized NGL price, before the impact of derivatives and including transportation costs, averaged $0.31 per gallon, equivalent to $12.91 per barrel, or approximately 35% of the average WTI oil price

Ops Update

The table below summarizes Gulfport's activity for the three-month and six-month period ended June 30, 2020:

Utica Shale

In the Utica Shale, during the second quarter of 2020, Gulfport spud five gross (4.1 net) operated wells. The wells drilled during this period had an average lateral length of approximately 8,300 feet. In addition, Gulfport turned-to-sales 10 gross (10 net) operated wells with an average stimulated lateral length of approximately 9,500 feet.

For the six-month period ended June 30, 2020, Gulfport spud 12 gross (11.1 net) operated wells. The wells drilled during this period had an average lateral length of approximately 9,500 feet. Normalizing to an 8,000 foot lateral length, Gulfport's average drilling days from spud to rig release totaled approximately 18.5 days, an improvement of 6% from the 2019 average. In addition, Gulfport turned-to-sales 13 gross (13 net) operated wells with an average stimulated lateral length of approximately 10,800 feet. Total well costs per lateral foot were $915 in the six-month period ended June 30, 2020, an improvement of 18% versus full year 2019 levels.

At present, Gulfport has one operated drilling rig running in the play and expects to continue running one rig through the third quarter of 2020.

SCOOP

In the SCOOP, during the second quarter of 2020, Gulfport spud one gross (0.7 net) operated well which had an average lateral length of approximately 9,200 feet.

For the six-month period ended June 30, 2020, Gulfport spud six gross (5.2 net) operated wells. The wells drilled during this period had an average lateral length of approximately 9,400 feet. Normalizing to an 8,000 foot lateral length, Gulfport's average drilling days from spud to rig release totaled approximately 37.0 days, an improvement of 32% from the 2019 average. Total well costs per lateral foot were $1,065 in the six-month period ended June 30, 2020, an improvement of 31% versus full year 2019 levels.

At present, Gulfport has one operated drilling rig running in the play and expects to continue running one rig for the remainder of 2020.