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Gulfport Energy Second Quarter 2022 Results

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   |    Wednesday,August 03,2022

Gulfport Energy Corp. reported financial and operating results for the three months ended June 30, 2022 and provided an update on its 2022 development plan and financial guidance.

Second Quarter 2022 and Recent Highlights:

• Delivered total net production of 959.1 MMcfe per day
• Reported $256.6 million of net income and $204.5 million of adjusted EBITDA⁽¹⁾
• Generated $129.5 million of net cash provided by operating activities and $80.3 million of free cash flow⁽¹⁾
• Increased borrowing base to $1.0 billion from $850 million with a $700 million elected commitment
• Repurchased approximately 2.2 million shares of common stock for a total of $189.3 million as of July 28, 2022
• Expanded common stock repurchase program from $200 million to $300 million

CEO Tim Cutt said: "Gulfport delivered another strong quarter, driven by the continued outperformance of our historical development program and the robust productivity from our 2022 SCOOP turn in lines. We generated a significant amount of free cash flow during the first six months of 2022, allowing us to return capital to our shareholders while also maintaining our strong financial position, exiting the quarter with a conservative leverage ratio below 1.0x. We have repurchased a total of 2.2 million shares since initiating and expanding the program, decreasing our common shares outstanding by roughly 8% compared to the start of the program.

“As we enter our period of peak activity in the third quarter, the inflationary effects impacting the industry have led us to increase our capital outlook for the year. In addition, the required casing remediation we discussed in the previous quarter caused us to release our Utica frac unit and delay the completion program in 2022. After an approximately 45-day delay, we returned to executing the Utica completion program and plan to bring the next pad online in mid-August. This impacted our ability to achieve the high end of our previously provided production guidance range, despite the very strong start to the year."

"Our outlook for free cash flow remains strong with our free cash flow guidance unchanged and we continue to prioritize the return of capital to our shareholders through common stock repurchases while also evaluating all additional opportunities of return of capital. Our commitment to returning capital to shareholders is further demonstrated by the Board’s $100 million increase to the share repurchase program.”

Expanded Common Stock Repurchase Program

Gulfport's board of directors recently expanded the Company's previously announced common stock repurchase program and Gulfport is now authorized to repurchase up to $300 million of its outstanding shares of common stock. Purchases under the repurchase program may be made from time to time in open market or privately negotiated transactions, and will be subject to available liquidity, market conditions, credit agreement restrictions, applicable legal requirements, contractual obligations and other factors. The repurchase program does not require the Company to acquire any specific number of shares. The Company intends to purchase shares under the repurchase program opportunistically with available funds while maintaining sufficient liquidity to fund its capital development program. The repurchase program may be suspended from time to time, modified, extended or discontinued by the board of directors at any time.

As of July 28, 2022, the Company had repurchased approximately 2.2 million shares of common stock at a weighted-average share price of $86.59 during 2022, totaling approximately $189.3 million in aggregate.

Operational Update

The table below summarizes Gulfport's operated drilling and completion activity for the second quarter of 2022:

Capital Investment

Capital investment was $105.2 million (on an incurred basis) for the second quarter of 2022, of which $95.2 million related to drilling and completion (“D&C”) activity and $10.0 million related to leasehold and land investment.

For the six-month period ended June 30, 2022, capital investment was $205.6 million (on an incurred basis), of which $189.5 million related to D&C activity and $16.0 million to leasehold and land investment.

Financial Position and Liquidity

As of June 30, 2022, Gulfport had approximately $6.6 million of cash and cash equivalents, $124.0 million of borrowings under its credit facility, $113.2 million of letters of credit outstanding and $550 million of outstanding 2026 Senior Notes.

Gulfport’s liquidity at June 30, 2022, totaled approximately $469 million, comprised of the $6.6 million of cash and cash equivalents and approximately $462.8 million of available borrowing capacity under its credit facility.

In June 2022, the company paid approximately $1.4 million in cash dividends on its preferred stock.

Spring Borrowing Base Redetermination

Gulfport completed its spring borrowing base redetermination during the second quarter of 2022 and on May 2, 2022, the Company entered into the first amendment to its credit agreement (the “Amendment”) governing the credit facility. The Amendment, among other things, increased the borrowing base under the credit facility from $850 million to $1 billion, with aggregate elected lender commitments to remain at $700 million. In addition, the Amendment eased certain requirements and limitations related to hedging, amended the covenants governing certain restricted payments and provides for the transition from a LIBOR to a SOFR benchmark. The Amendment increases Gulfport's financial flexibility to continue to execute our business plan and provides additional clarity around our ability to return capital to shareholders.

Updated Full Year 2022 Guidance

Driven by inflationary effects, Gulfport has updated its forecasted capital expenditures for D&C activity and expects to invest in a range of $375 million to $405 million during 2022. In addition, based on activity to date and planned activity, Gulfport has increased its forecasted leasehold and land investment by approximately $10 million during 2022.

Delays associated with the casing remediation in the Utica has deferred the expected turn-in-line dates for several wells and Gulfport has narrowed its expected full year net production to a range of 975 MMcfe per day to 1,000 MMcfe per day.

Taking into account the previously mentioned updates, Gulfport has also updated its transportation, gathering, processing and compression expense per Mcfe for 2022.