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Gulfport Energy Third Quarter 2022 Results

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   |    Tuesday,November 01,2022

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

Third Quarter 2022 and Recent Highlights:

• Delivered total net production of 914.9 MMcfe per day
• Completed four-well Extreme pad in the Utica and brought online at a combined gross peak production rate of approximately 140 MMcfe per day
• Reported $18.5 million of net loss and $172.7 million of adjusted EBITDA⁽¹⁾
• Generated $167.9 million of net cash provided by operating activities and $11.1 million of free cash flow⁽¹⁾
• Reaffirmed borrowing base of $1.0 billion with elected commitments to remain at $700 million
• Returned approximately $232.8 million of capital to shareholders through the repurchase of approximately 2.7 million shares of common stock through October 27, 2022
• Issued 2022 Corporate Sustainability Report and remain committed to delivering clean, low-carbon energy in a safe, environmentally responsible manner

CEO Tim Cutt commented: "The third quarter marked the most active quarter of Gulfport's 2022 operational plan, as we completed 18 wells across our operating areas. Our third quarter production came in as expected, turning to sales nine wells in total, six of which occurred during September providing minimal production uplift for the quarter. Our base production and 2022 turn in lines continue to perform at or above expectations and we remain on track to bring online an additional 11 wells during the fourth quarter. We forecast a strong quarter over quarter production increase of more than 15%, and we reiterate our previously provided production guidance.

"To improve the efficiency of our 2023 development program, we have elected to add a top hole drilling rig in the Utica during the fourth quarter of 2022. This will accelerate our drilling program as we enter 2023 and begin drilling seven additional wells during 2022. The accelerated activity will enable us to execute a continuous completion program in the Utica, eliminating the risk of releasing crews in today's tight service market and providing the opportunity for increased efficiencies and cost savings. This additional capital, coupled with the recent decrease in commodity prices and widening of basis differentials, has resulted in an update to our full year 2022 free cash flow guidance to approximately $300 million."

"We continue to prioritize the return of capital to our shareholders through common stock repurchases, repurchasing a total of 2.7 million shares since initiating the program, reducing our outstanding common shares by over 10% compared to the start of the program. Consistent with 2022, we expect to return our 2023 free cash flow to shareholders, excluding acquisitions, while maintaining a conservative leverage ratio."

2022 Corporate Sustainability Report

Gulfport today released its 2022 Corporate Sustainability Report. The report is a direct reflection of Gulfport's continuous improvement culture and incorporates numerous ESG data points. The Company continues prioritizing the delivery of low-emission hydrocarbons the world needs while maintaining our position as a responsible producer. The report is available at gulfportenergy.com/sustainability.

Common Stock Repurchase Program

Gulfport's Board of Directors previously authorized the Company 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 October 27, 2022, the Company had repurchased approximately 2.7 million shares of common stock at a weighted-average share price of $87.37 during 2022, totaling approximately $232.8 million in aggregate.

Operational Update

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

Gulfport's net daily production for the third quarter of 2022 averaged 914.9 MMcfe per day, primarily consisting of 615.6 MMcfe per day in the Utica and 299.2 MMcfe per day in the SCOOP. For the third quarter of 2022, Gulfport's net daily production mix was comprised of approximately 89% natural gas, 8% natural gas liquids ("NGL") and 3% oil and condensate.

Capital Investment

Capital investment was $141.4 million (on an incurred basis) for the third quarter of 2022, of which $133.3 million related to drilling and completion ("D&C") activity and $8.1 million related to leasehold and land investment.

For the nine-month period ended September 30, 2022, capital investment was $346.7 million (on an incurred basis), of which $322.5 million related to D&C activity and $24.2 million to leasehold and land investment.

Financial Position and Liquidity

As of September 30, 2022, Gulfport had approximately $8.3 million of cash and cash equivalents, $179.0 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 September 30, 2022, totaled approximately $416 million, comprised of the $8.3 million of cash and cash equivalents and approximately $407.8 million of available borrowing capacity under its credit facility.

In September 2022, the company paid approximately $1.3 million in cash dividends on its preferred stock.

Fall Borrowing Base Redetermination

On October 31, 2022, Gulfport completed its semi-annual borrowing base redetermination during which the borrowing base was reaffirmed at $1.0 billion with the elected commitments to remain at $700 million.

Updated Full Year 2022 Guidance

Gulfport has updated its forecasted capital expenditures for D&C activity to include the addition of a top hole drilling rig in the Utica during the fourth quarter of 2022. This increased level of activity will allow for Gulfport to execute a continuous completion program during 2023, ultimately providing the opportunity for increased efficiencies and cost savings. Including this incremental activity, Gulfport now expects to invest in approximately $415 million on D&C capital during 2022. The Company continues to finalize the details of its 2023 development plan but assuming approximately 1.5 rigs in the Utica and a continuous rig program in the SCOOP, we are currently forecasting an increase of less than 5% in D&C capital for 2023 over 2022.

Gulfport has updated its guidance for its expected realized natural gas differential, before hedges, to $(0.30) to $(0.40) off NYMEX from a range of $(0.15) to $(0.25) previously. The widening differential is driven by actual settled prices during the months of September and October as well as current expectations for the remainder of the fourth quarter of 2022.

Taking into account the previously mentioned updates, Gulfport has also updated its free cash flow guidance for the year to approximately $300 million.

Gulfport's 2022 guidance assumes commodity strip prices as of October 10, 2022, adjusted for applicable commodity and location differentials, and no property acquisitions or divestitures.