Gulfport Energy (GPOR) Q2 Results - Aug 2

[dan_s]

Gulfport reported decent Q2 results and they continue to improve their balance sheet and reduce the outstanding share count. My update forecast/valuation model will be posted the EPG website on Saturday morning. - Dan
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OKLAHOMA CITY, Aug. 01, 2019 (GLOBE NEWSWIRE) -- Gulfport Energy Corporation (NASDAQ: GPOR) (“Gulfport” or the “Company”) today reported financial and operational results for the three-months and six-months ended June 30, 2019 and provided an update on its 2019 activities. Key information includes the following:

Net production averaged 1,359.0 MMcfe per day during the second quarter of 2019.

Net income of $235.0 million, or $1.47 per diluted share, for the second quarter of 2019. < Beat my forecast.

Adjusted net income of $33.3 million, or $0.21 per diluted share, for the second quarter of 2019.

Adjusted EBITDA (as defined and reconciled below) of $194.5 million for the second quarter of 2019.

Reaffirmed 2019 total capital expenditures to be in the range of $565 to $600 million and funded entirely within cash flow.

Reiterated 2019 full year net production to average 1,360 MMcfe to 1,400 MMcfe per day.

Maintained large hedge position of approximately 1,380 BBtu per day of natural gas fixed price swaps at an average fixed price of $2.81 per MMBtu and approximately 5,500 barrels per day of oil fixed price swaps at an average fixed price of $60.81 per barrel for the remainder of 2019.

Completed certain non-core asset divestitures.
Repurchased $105 million principal amount of the Company's senior notes outstanding for a total cash spend of $80 million in July 2019.

Chief Executive Officer and President, David M. Wood, commented, "This was a successful quarter for Gulfport as we delivered results in line with expectations, highlighted by another active three months in both our Utica Shale and SCOOP asset areas and high single digit production growth over the first quarter of 2019. We remain on track to deliver on our 2019 production guidance, while adhering to our previously provided capital budget, and expect to begin significant free cash flow generation during the third quarter of 2019."

Mr. Wood continued, "In addition, Gulfport continued to make progress on our strategic goals set at the beginning of the year, today announcing several non-core asset divestitures not contemplated within our current development plan. Furthermore, the monetization process of certain water infrastructure assets Gulfport holds across our SCOOP position is ongoing. As expected, this process has been very competitive and we are comfortable with a minimum value of what we expect to realize on the transaction. Taking this into consideration, we took advantage of an attractive opportunity to retire senior debt at a meaningful discount and we recently repurchased and retired a portion of our senior notes outstanding. As we look towards the remainder of 2019 and beyond, we will remain disciplined in our allocation of capital, focusing both on maintaining a strong balance sheet and enhancing shareholder value."

Non-Core Asset Divestitures
Gulfport recently closed the sale of its Southern Louisiana assets to a third party for a total consideration of approximately $54.1 million. Gulfport received approximately $9.2 million in cash and retained overriding royalty interests worth up to approximately $7.7 million based on current strip pricing. In addition, Gulfport could also receive contingent payments of up to $6.8 million based on commodity prices exceeding certain thresholds over the next two years. The buyer agreed to assume all plugging and abandonment liabilities associated with these assets, which totaled approximately $29.0 million and Gulfport will receive approximately $1.4 million in insurance premium reimbursement due to the sale of these assets. Net production from the assets averaged 1.5 MBoe per day during the six-months ended June 30, 2019, less than 1% of the Company's production during that period. The effective date of the transaction is August 15, 2018 and the transaction closed on July 3, 2019.

In addition, Gulfport closed the sale of its remaining interest in Tatex Thailand II to a third party for approximately $1.9 million in cash. No production is included in this transaction and the transaction closed during the second quarter of 2019.

Balance Sheet and Liquidity
As of June 30, 2019, Gulfport had cash on hand of approximately $20.8 million. As of June 30, 2019, Gulfport’s $1.4 billion revolving credit facility, under which Gulfport has an elected commitment of $1.0 billion, had outstanding borrowings of $155.0 million and outstanding letters of credit totaling $251.5 million. The Company's total liquidity as of June 30, 2019 was approximately $614.3 million, which included cash on hand and borrowing capacity of approximately $593.5 million under the Company's revolving credit facility.

In July 2019, Gulfport repurchased and retired approximately $105 million principal amount of its senior notes for a total cash spend of approximately $80 million.

Stock Repurchase Program
In January 2019, Gulfport's board of directors authorized the Company to acquire a portion of its outstanding common stock within a 24-month period. As of August 1, 2019, the Company had repurchased 3.8 million shares totaling approximately $30 million during 2019.

[dan_s]

Two analysts have published fresh reports on GPOR since the company released Q2 results.
Williams Capital rates it a BUY with an $8.00 price target.
Stifel rates it a HOLD with a $6.80 price target.

My valuation, based on very conservative assumptions, is now $9.00/share.
> GPOR is profitable and should remain profitable in Q3 and Q4 because all of their gas is hedged at $2.81/MMbtu in 2H 2019.
> During 2H 2019 Adjusted Net Income s/b $0.40 to $0.50 and cash flow from operations s/b over $2.00/share.
> Proceeds from non-core assets sales and cash flow from operations should more than cover their capital expenditures.
> NGL prices dipped in Q2, but should improve heading into year-end.