Gulfport Energy (GPOR) - New Forecast

[dan_s]

I have updated my forecast model for Gulfport Energy (GPOR) for the impact of the SCOOP/STACK acquisition and extended it through 2018. Production guidance for 2017 was provided by Gulfport on their most recent PowerPoint presentation that explains the impact of the acquisition.

Q4 2016 production s/b approximately 130,000 BOE per day (86.5% natural gas, 9.3% NGLs and 4.2% crude oil).
When the acquisition closes in February, production will jump by 30,000+ BOE per day.

2017 production guidance is 174,000 to 183,000 BOE per day ( 85% natural gas, 10% NGL and 5% crude oil ).
Gulfport's exit rate at 12/31/2017 should be over 200,000 BOE per day. Compare this to their production of less than 10,000 BOE per day just five years ago.
The production mix should be more liquids in 2017 with a four rig program in the SCOOP/STACK, but I wanted to be conservative in my forecast.

My valuation of GPOR has been increased by $3.75 to $43.75/share. This compares to First Call's price target of $32.41.

The SCOOP/STACK acquisition is a SIGNIFICANT transaction for a company of this size. Wall Street analysts are not quite sure how to value it or forecast its impact on the company. My valuation goes up because it is immediately accretive to cash flow from operations. I have lowered my multiple for valuing GPOR from 12X to 10X operating cash flow per share, but the big jump in CFPS from 2016 to 2018 takes the valuation higher.

First Call numbers for revenues, EPS and CFPS include several analysts forecasts which have not been updated since the SCOOP/STACK acquisition was announced.

Keep this stuff in mind:
> It will take Wall Street awhile to figure this one out. Gulfport's Q4 operations update and year-end reserve report s/b helpful.
> Gulfport is a "gasser" and Wall Street has yet to fully grasp the tightness coming in the gas and NGL markets in 2017.
> Q2 results will include the full impact of this "transformative acquisition". GPOR will look a lot better to Wall Street in about six months. Think about Jan, 2018 Call Options on this one.

[ChuckGeb]

July 2017 is latest term option currently available on GPOR.

[dig4value]

With the latest operational update from GPOR yesterday, They look like things are going in the right direction. And with the recent big draw in NG announced. Seems like GPOR should be moving up... but it is still just barely up, can't seem to get past 22.
I am long via Long ITM July calls, and I am thinking about adding more, waiting for the market to recognize the value in GPOR. Any comments welcome.

I like Dan's projections and target price, And GPOR may be the best value in NG plays. May just buy the common stock and wait it out.

Any comments welcome.

[setliff]

today's action if it holds thru close will break the down trend it has been in. somewhat encouraging.

[dan_s]

Gulfport has a first class team and big production growth locked in. Wall Street thinks they paid too much in SCOOP/STACK. I doubt they did. My production forecast may be too conservative.