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Gulfport Energy(GPOR) - 2023 Q2 - Earnings Call Transcript
GPORGulfport Energy(GPOR)2023-08-02 17:38
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Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of approximately 145millionduringthesecondquarter,withnetcashprovidedbyoperatingactivitiesbeforechangesinworkingcapitaltotalingapproximately145 million during the second quarter, with net cash provided by operating activities before changes in working capital totaling approximately 134 million, which funded capital expenditures despite a soft gas macro environment [9][24][47] - The average daily production totaled 1.039 billion cubic feet equivalent per day, exceeding analyst expectations, driven by accelerated well completions and strong performance from the development program [41][67] - The company has reduced its operating unit cost guidance for the full year 2023 to 1.16to1.16 to 1.24 per million cubic feet equivalent, an improvement of approximately 4% based on the midpoint of previously issued guidance [6][67] Business Line Data and Key Metrics Changes - The company drilled and rig released eight gross wells during the second quarter, with seven in the Utica, and completed 13 gross wells, including 11 in the Utica and two in the SCOOP [41][63] - The company’s three well Barber Ridge pad in Monroe County continues to outperform historic results, producing in excess of 70 million cubic feet equivalent per day [65] - The average EUR for 1000 feet of lateral in the Utica has improved by over 50% since 2020, while the SCOOP area has seen a 75% improvement in program average EUR per 1000 feet of lateral since 2020 [43][32] Market Data and Key Metrics Changes - The company expects its natural gas basis differential before hedges to average 0.20to0.20 to 0.35 below NYMEX for the full year, with current forward prices suggesting a wider differential towards the end of the year [10][33] - The all-in realized price during the second quarter was 2.76perMcfe,whichis2.76 per Mcfe, which is 0.66 above the NYMEX Henry Hub Index price, highlighting the benefits of the company’s diverse marketing portfolio [71] Company Strategy and Development Direction - The company remains focused on disciplined growth, lowering costs, improving operational cycle times, and enhancing returns while maintaining a strong balance sheet [27][69] - The company plans to allocate approximately 40millionfromitsadjustedfreecashflowtowardsdiscretionaryacreageacquisitionstoenhanceitshigh−qualityresourcedepth[28]−Thecompanyiscommittedtoreturningcapitaltoshareholdersthroughcommonstockrepurchases,havingreducedoutstandingsharesbyover1340 million from its adjusted free cash flow towards discretionary acreage acquisitions to enhance its high-quality resource depth [28] - The company is committed to returning capital to shareholders through common stock repurchases, having reduced outstanding shares by over 13% since initiating the program [8][13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the volatility in the natural gas macro environment but expressed confidence in the company’s valuation and operational execution capabilities, viewing the current landscape as a significant investment opportunity [14] - The company anticipates accelerating adjusted free cash flow in the second half of the year, driven by improved commodity prices and operational efficiencies [24][72] - Management emphasized the importance of developing assets efficiently and sustainably, focusing on enhancing margins and optimizing efficiencies [69] Other Important Information - The company incurred capital expenditures of 110.6 million related to drilling and completion activity and 18.7millionrelatedtoleaseholdandlandinvestmentduringthesecondquarter[48]−Thecompany’sliquidityremainsstrong,totaling18.7 million related to leasehold and land investment during the second quarter [48] - The company’s liquidity remains strong, totaling 732 million, providing flexibility for future development needs [50][73] Q&A Session Summary Question: What should be expected regarding Marcellus de-risking results? - Management indicated that early results are as expected and they are looking to delineate the liquids content to better understand the economic viability and production profiles [76][77] Question: Is the current hedge position satisfactory for 2024? - Management expressed comfort with the existing hedge position for 2024, indicating flexibility to adjust based on market conditions [83] Question: What is the outlook for capital allocation in the SCOOP area? - Management noted plans to allocate more capital to the Oklahoma SCOOP area in 2024, with expectations of returning to a more historic level of development activity [32][84]