Gulfport Energy (GPOR)

[dan_s]

I spent several hours this morning going over my forecast model for Gulfport, line-by-line. I have a HIGH level of confidence in the forecast and it is VERY CLOSE to what First Call is now showing. First Call is a service of Reuters. They provide forecasts for revenue, earnings per share and operating cash flow per share. What they report is an average of all of the analysts forecasts that are submitted to Reuters. It usually takes a week for First Call to update their numbers after a company releases quarterly results, which is one reason we wait at least a week after quarterly results come out to update our company profiles.

We will be publishing an updated profile on Gulfport late today.

I have lowered by valuation by $4.00 to $34.00/share. I have not lowered my opinion of this outstanding growth company. I just lowered the multiple of operating cash flow that I am using to value it from 10X to 9X.

Credit Suisse published a very detailed report on Gulfport on March 3, 2017 and their valuation was $33.00/share. Keep in mind that natural gas prices were much lower in early March than they are today.

The only reason that I can see for Gulfport's low share price today is that the company is outspending their operating cash flow this year. Investors don't like that. Plus, the market still needs more information about the SCOOP play.

Here is why I think now is a good time to build a position in GPOR:
> The company should report results on at least seven more operated SCOOP wells this quarter. Two very soon. If their Springer and Sycamore test wells come on strong it will be VERY GOOD news for Gulfport and for Jones Energy (JONE). Continental Resources (CLR) is active in the same area.
> They raised their production guidance and they have a long history of beating guidance. Production will be up more than 50% YOY in 2017. Exit rate will be over 220,000 Boepd.
> They have more than enough liquidity to fund this year's capital program AND capex s/b lower going forward.
> Based on my forecast, Gulfport should be able to fund 30% annual production growth going forward with cash flow from operations. < This fact along should double the share price.
> GPOR is heavily weighted to natural gas price; you can take oil prices to zero in my forecast and it only lowers my valuation by $3/share. Crude oil is only 4% of Gulfport's production.
> Last but not least: I am expecting natural gas prices to move a lot higher when natural gas storage levels go below the 5-year average, which looks like a 99.9% probability of happening in September.