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Gulfport Energy Third Quarter 2021 Results

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   |    Thursday,November 04,2021

Gulfport Energy Corp. reported its Q3 2021 results.

Highlights:

• Amended credit facility increasing liquidity by more than $160 million
• Authorized stock repurchase program to acquire up to $100 million of outstanding common stock⁽²⁾
• Completed six-well Angelo pad in the Utica during the third quarter and subsequently brought online at a combined gross production rate of 250 MMcfe per day
• Reported $126.3 million of Net Cash Provided by Operating Activities
• Delivered $69.7 million of Free Cash Flow (non-GAAP measure)
• Reduced 2021 full year Recurring Cash General and Administrative Expense (non-GAAP measure) guidance to total $42 to $44 million, a $3 million decrease from the previous midpoint
• Increased expected 2021 full year Free Cash Flow (non-GAAP measure) guidance to $345 million to $365 million, a $55 million increase from previous midpoint

CEO Tim Cutt said: "Gulfport delivered strong third quarter 2021 results, driven by reservoir outperformance and operational execution. In addition, the six-well Angelo pad was completed and subsequently brought online ahead of expectations. The efficiencies realized across the enterprise to date have enabled us to improve our 2021 guidance, narrowing the outlook for full year net production and reducing our forecasted G&A expense to the expected 2022 run rate. These improvements, coupled with the recent strength in commodities, resulted in another quarter of free cash flow generation and positions the Company to deliver significant free cash flow going forward.

"We recently amended the Company's credit facility, increasing our liquidity by more than $160 million. The amendment provides the financial flexibility to execute our ongoing business plan and accelerates our ability to begin returning capital to shareholders, as demonstrated with today's announcement of the stock repurchase program."

1. 2021 full year outlook reflects the combination of Successor and Predecessor company results, unless otherwise noted. The Company refers to the post-emergence reorganized company as the Successor for periods subsequent to May 18, 2021, and to the pre-emergence company as the Predecessor for periods on or prior to May 17, 2021.
2. Subject to available liquidity, market conditions and restrictions under the credit facility.

Stock Repurchase Program

Gulfport announced today that its board of directors has approved a stock repurchase program to acquire up to $100 million of its outstanding 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. This repurchase program is authorized to extend through December 31, 2022 and may be suspended from time to time, modified, extended or discontinued by the board of directors at any time.

Operational Update

For the third quarter of 2021, the Company spud two gross operated wells in the Utica with a planned average lateral length of approximately 15,920 feet and two gross operated wells in the SCOOP with a planned average lateral length of approximately 9,880 feet. In addition, Gulfport turned-to-sales two gross operated wells in the Utica with an average lateral length of approximately 13,700 feet.

Gulfport's net daily production for the third quarter of 2021 averaged 973.3 MMcfe per day, primarily consisting of 699.0 MMcfe per day in the Utica and 273.8 MMcfe per day in the SCOOP. For the third quarter of 2021, Gulfport's net daily production mix was comprised of approximately 89% natural gas, 8% natural gas liquids ("NGL") and 3% oil.

Subsequent to the third quarter of 2021, Gulfport agreed to monetize certain overriding royalty interests associated with assets held in the Bakken to a third party for approximately $3.8 million in cash. Net production from the assets averaged approximately 50 Boe per day, comprised of approximately 92% oil. The effective date of the transaction is August 1, 2021 and the transaction is expected to close in the fourth quarter of 2021.

Capital Investment

Capital investment was $80.9 million (on an incurred basis) for the third quarter of 2021, of which $77.8 million related to drilling and completion ("D&C") activity and $3.1 million related to leasehold and land investment.

For the nine-month period ended September 30, 2021, capital investment was $221.5 million (on an incurred basis), of which $214.0 million related to D&C activity and $7.5 million to leasehold and land investment.

Amended and Restated Credit Facility

On October 14, 2021, Gulfport announced that it has entered into the Third Amended and Restated Credit Agreement ("Amendment"), which amends and refinances the Company's Credit Agreement, dated as of May 17, 2021 ("Exit Facility"). The Amendment provides for, among other things, an increase in aggregate elected lender commitments from $580 million to $700 million, the repayment of the term loan under the Exit Facility, the elimination of the $40 million availability blocker and a maturity date extension to October 2025 from May 2024.

Financial Position and Liquidity

As of September 30, 2021, Gulfport had approximately $4.5 million of cash and cash equivalents, $200.6 million of borrowings under its Exit Facility, $115.5 million of letters of credit outstanding and $550 million of outstanding 2026 senior notes.

Pro forma for the Amendment, Gulfport's liquidity at September 30, 2021, totaled approximately $388 million, comprised of the $4.5 million of cash and cash equivalents and approximately $384 million of available borrowing capacity under its new revolving credit facility.

On September 30, 2021, the company paid dividends on its Preferred Stock, which included 2,065 shares of New Preferred Stock paid in kind and approximately $30,000 of cash in lieu of fractional shares.

2021 Guidance Update

Driven by reservoir outperformance and operational execution in the Utica coming in ahead of expectations, Gulfport has narrowed its 2021 full year net production guidance range to average 980 MMcfe to 1,000 MMcfe per day.

Gulfport increased guidance for its expected realized natural gas liquids price, before hedges, as a percent of WTI to 55% to 60% from a range of 45% to 50% previously. The increase was driven by strong realizations reported during the nine-month period ended September 30, 2021 and expectations for continued strong fundamentals to result in higher prices during the fourth quarter of 2021.

Recurring cash general and administrative expense ("G&A") (non-GAAP measure) guidance was reduced to total $42 million to $44 million for full year 2021, a decrease of $3 million from the previous midpoint, reflecting the Company's continued focus on reducing costs to target top-quartile G&A and in line with its expected 2022 run rate.

As a result of all the previously mentioned updates combined with a significant increase in commodity prices, Gulfport has increased its forecasted free cash flow (non-GAAP measure) guidance for 2021 to $345 to $365 million.