GPOR accounting
GPOR accounting
What do you make of Gulfport's restatement of Q4 results? Certainly punishing.
Re: GPOR accounting
Stifel's Take:
Gulfport Energy Corporation (GPOR, $0.90, Buy; Target $2.50)
Earnings Miss. GPOR Materially Cuts 2020 Production and Capex Outlook - Jane Trotsenko
We view yesterday's earnings update as negative. Apart from missing on the quarter, the company also materially cut its 2020 production and capex guidance, which now calls for 18% y/y production decline and more than 50% y/y decline in capex spending. While the company continues to target FCF neutrality this year, negative earnings revisions will drive the stock lower in our view (the stock is already down 13% after hours). Today's update removed almost 250 mmcf/d from the 2020 and 2021 natural gas supply, representing an important step forward towards a balanced market. Today's press release reminds us of the extent to which natural gas producers bear the brunt of low natural gas pricing.
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My comments in blue. - Dan
The HUGE impairment charge sounds bad, but they still own the assets. Gulfport uses the Full Cost Method of accounting, which requires a "Ceiling Test" at the end of each quarter. The big impairment charge is due to low gas prices and the GAAP rule that assets which are not going to be developed within five years cannot be counted at proved at year-end. All of the small-caps and especially the "gassers" are being punished by the market these days.
OKLAHOMA CITY, Feb. 27, 2020 (GLOBE NEWSWIRE) -- Gulfport Energy Corporation (GPOR) (“Gulfport” or the “Company”) today reported financial and operational results for the quarter and year ended December 31, 2019 and announced its 2020 operational and financial guidance.
Full Year 2019 Highlights:
Net production averaged 1,374.6 MMcfe per day < Compares to my forecast of 1,380,000 MMcfe per day (230,000 Boepd).
Net loss of $2,002.4 million, or $(12.49) per diluted share, reflecting a non-cash impairment charge of $2,039.8 million
Adjusted net income (non-GAAP) of $118.6 million, or $0.72 per diluted share
Adjusted EBITDA (non-GAAP) of $814.4 million
Cash provided by operating activity of $724.0 million < Compares to my forecast of $690.4 million.
Generated Free Cash Flow (non-GAAP), excluding working capital changes as defined and reconciled below, of $37.8 million
Year end total proved reserves of 4.5 Tcfe < Compares to 12/31/2018 proved reserves of 4,743 Bcfe.
Completed certain non-core asset divestitures
Reduced debt by approximately $50 million through discounted bond repurchases
Total liquidity pro forma for recent water infrastructure asset sale of $693 million at year-end 2019 < GPOR is in "hunker-down mode", so operating cash flow and liquidity are very important.
2020 Plan Highlights:
2020 total planned capital expenditures of $285 million to $310 million, approximately 50% less than 2019
Plan results in forecasted positive free cash flow in 2020 at current strip prices < This is good and comes close to my forecast for 2020.
Forecasted 2020 full year net production is estimated to average 1,100 MMcfe to 1,150 MMcfe per day < Below my forecast.
Plan to maintain or reduce per unit lease operating expense and midstream gathering and processing expense during 2020 despite declining year-over-year production
Approximately 50% of 2020 gas production is hedged at an average fixed price of $2.86 per MMBtu < Very good.
David M. Wood, President and Chief Executive Officer, commented, “Gulfport took many positive steps in 2019 to address the challenges facing our industry and better position the Company. We successfully completed our 2019 drilling program within budget and on target with production estimates. We also completed several non-core divestitures which improved our liquidity and continued our efforts to reduce leverage and absolute debt levels through discounted bond repurchases. We have also strengthened our board and management team, adding two additional independent directors in the past two months, and assembled a talented new management team that we believe will serve the organization well in the future.”
Mr. Wood continued, “As we enter 2020, remain committed to allocating capital in a disciplined manner, focusing on returns and maintaining strong liquidity. Gulfport’s 2020 plan announced today significantly reduces total capital expenditures as compared to 2019 levels to account for the current low gas price environment. At current strip pricing, our 2020 drilling program will be funded within cash flow ensuring a very strong liquidity position through 2020 with a relatively low amount of revolver draw. The large decline in spending during 2020 also allows us to retain our high value inventory for a better gas price environment in the future. We continue to focus on cost and efficiency improvements in every aspect of our business to ensure we maximize returns during this downturn.”
Balance Sheet and Liquidity
As of December 31, 2019, Gulfport had a commitment under its revolving credit facility of $1.0 billion with $120.0 million drawn. After accounting for cash on hand of approximately $6.1 million and outstanding letters of credit totaling $243.6 million, the Company’s liquidity as of December 31, 2019 was approximately $642.5 million. Pro forma for the $50 million divestiture of water infrastructure assets across Gulfport’s SCOOP position, the Company’s total liquidity was estimated to be $692.5 million at December 31, 2019.
Gulfport Energy Corporation (GPOR, $0.90, Buy; Target $2.50)
Earnings Miss. GPOR Materially Cuts 2020 Production and Capex Outlook - Jane Trotsenko
We view yesterday's earnings update as negative. Apart from missing on the quarter, the company also materially cut its 2020 production and capex guidance, which now calls for 18% y/y production decline and more than 50% y/y decline in capex spending. While the company continues to target FCF neutrality this year, negative earnings revisions will drive the stock lower in our view (the stock is already down 13% after hours). Today's update removed almost 250 mmcf/d from the 2020 and 2021 natural gas supply, representing an important step forward towards a balanced market. Today's press release reminds us of the extent to which natural gas producers bear the brunt of low natural gas pricing.
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My comments in blue. - Dan
The HUGE impairment charge sounds bad, but they still own the assets. Gulfport uses the Full Cost Method of accounting, which requires a "Ceiling Test" at the end of each quarter. The big impairment charge is due to low gas prices and the GAAP rule that assets which are not going to be developed within five years cannot be counted at proved at year-end. All of the small-caps and especially the "gassers" are being punished by the market these days.
OKLAHOMA CITY, Feb. 27, 2020 (GLOBE NEWSWIRE) -- Gulfport Energy Corporation (GPOR) (“Gulfport” or the “Company”) today reported financial and operational results for the quarter and year ended December 31, 2019 and announced its 2020 operational and financial guidance.
Full Year 2019 Highlights:
Net production averaged 1,374.6 MMcfe per day < Compares to my forecast of 1,380,000 MMcfe per day (230,000 Boepd).
Net loss of $2,002.4 million, or $(12.49) per diluted share, reflecting a non-cash impairment charge of $2,039.8 million
Adjusted net income (non-GAAP) of $118.6 million, or $0.72 per diluted share
Adjusted EBITDA (non-GAAP) of $814.4 million
Cash provided by operating activity of $724.0 million < Compares to my forecast of $690.4 million.
Generated Free Cash Flow (non-GAAP), excluding working capital changes as defined and reconciled below, of $37.8 million
Year end total proved reserves of 4.5 Tcfe < Compares to 12/31/2018 proved reserves of 4,743 Bcfe.
Completed certain non-core asset divestitures
Reduced debt by approximately $50 million through discounted bond repurchases
Total liquidity pro forma for recent water infrastructure asset sale of $693 million at year-end 2019 < GPOR is in "hunker-down mode", so operating cash flow and liquidity are very important.
2020 Plan Highlights:
2020 total planned capital expenditures of $285 million to $310 million, approximately 50% less than 2019
Plan results in forecasted positive free cash flow in 2020 at current strip prices < This is good and comes close to my forecast for 2020.
Forecasted 2020 full year net production is estimated to average 1,100 MMcfe to 1,150 MMcfe per day < Below my forecast.
Plan to maintain or reduce per unit lease operating expense and midstream gathering and processing expense during 2020 despite declining year-over-year production
Approximately 50% of 2020 gas production is hedged at an average fixed price of $2.86 per MMBtu < Very good.
David M. Wood, President and Chief Executive Officer, commented, “Gulfport took many positive steps in 2019 to address the challenges facing our industry and better position the Company. We successfully completed our 2019 drilling program within budget and on target with production estimates. We also completed several non-core divestitures which improved our liquidity and continued our efforts to reduce leverage and absolute debt levels through discounted bond repurchases. We have also strengthened our board and management team, adding two additional independent directors in the past two months, and assembled a talented new management team that we believe will serve the organization well in the future.”
Mr. Wood continued, “As we enter 2020, remain committed to allocating capital in a disciplined manner, focusing on returns and maintaining strong liquidity. Gulfport’s 2020 plan announced today significantly reduces total capital expenditures as compared to 2019 levels to account for the current low gas price environment. At current strip pricing, our 2020 drilling program will be funded within cash flow ensuring a very strong liquidity position through 2020 with a relatively low amount of revolver draw. The large decline in spending during 2020 also allows us to retain our high value inventory for a better gas price environment in the future. We continue to focus on cost and efficiency improvements in every aspect of our business to ensure we maximize returns during this downturn.”
Balance Sheet and Liquidity
As of December 31, 2019, Gulfport had a commitment under its revolving credit facility of $1.0 billion with $120.0 million drawn. After accounting for cash on hand of approximately $6.1 million and outstanding letters of credit totaling $243.6 million, the Company’s liquidity as of December 31, 2019 was approximately $642.5 million. Pro forma for the $50 million divestiture of water infrastructure assets across Gulfport’s SCOOP position, the Company’s total liquidity was estimated to be $692.5 million at December 31, 2019.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group