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Gulfport Energy(GPOR) - 2022 Q1 - Earnings Call Transcript
GPORGulfport Energy(GPOR)2022-05-04 15:52
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Financial Data and Key Metrics Changes - The company reported a net loss of 492millionforQ12022,primarilyduetoa492 million for Q1 2022, primarily due to a 664 million unrealized loss from its commodity derivative portfolio [16] - Adjusted EBITDA for the quarter was 235million,withnetcashprovidedbyoperatingactivitiestotaling235 million, with net cash provided by operating activities totaling 254 million [17] - Free cash flow generated during the quarter was 117million,withliquidityat117 million, with liquidity at 568 million at the end of the quarter [5][22] Business Line Data and Key Metrics Changes - The company achieved production of over 1 billion cubic feet equivalent of gas per day, driven by the outperformance of the 2021 development program and the addition of five new SCOOP wells [5][6] - Production is expected to decline in Q2 and Q3 before significant growth in Q4, with an overall year-on-year production growth expectation of more than 5% [6][12] Market Data and Key Metrics Changes - The company experienced inflationary pressures on capital costs, with expectations of inflation rising to 10% to 20% [10] - Operating costs increased slightly to 1.26perMcfe,attributedtohigherproductiontaxesandseasonalincreasesinLOE[11]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedoncost−effectiveproductionandcapitaldiscipline,withplanstoreturnapproximately501.26 per Mcfe, attributed to higher production taxes and seasonal increases in LOE [11] Company Strategy and Development Direction - The company is focused on cost-effective production and capital discipline, with plans to return approximately 50% of expected free cash flow to shareholders through share repurchases [12][25] - There is an ongoing evaluation of opportunities to increase land positions in the Utica, which could lead to sustainable organic growth [7][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the asset base and the improved balance sheet, which supports a low reinvestment rate while returning capital to shareholders [28] - The company remains optimistic about achieving its production guidance despite the casing failure incident, which is viewed as a timing issue rather than a long-term operational risk [9][56] Other Important Information - The board approved an increase in the share repurchase program to 200 million, representing about 50% of expected free cash flow for 2022 [5][25] - The company has entered into commodity derivative contracts to hedge and lock in future cash flow generation [18][19] Q&A Session Summary Question: Asset allocation and capital efficiency - Management indicated that the program will continue to be balanced, with potential for a more continuous drilling program in the SCOOP [33] Question: Additional acreage acquisition - Management is considering acquiring additional acreage in the Utica, particularly in the wet gas window, to enhance economic outcomes [35] Question: Shareholder returns and dividends - Management is currently focused on share repurchases due to the stock's undervaluation, but all alternatives, including dividends, are being considered [38][39] Question: Casing failure in the Utica - Management explained that the casing failure was due to a seam issue in the pipe, and they are taking precautions to prevent recurrence by using seamless pipe in future wells [44] Question: Buyback pace and strategy - Management stated that the pace of buybacks will depend on share price and market conditions, with a commitment to continue repurchasing shares as long as they are undervalued [46] Question: Well completions delay in the Utica - Management clarified that delays were due to the casing issue, which required additional work before proceeding with completions [55]