Gulfport Energy (GPOR) Update - March 2

[dan_s]

Gulfport is a "gasser" that will be going into "hunker down" mode until natural gas prices improve.

For the first half of 2020 thay have some good hedges in place with ~75% of production hedged at $2.77 for Q1 and $2.91 for Q2.
The really good hedges drop off in Q3, so they really need gas prices to improve or the back half of this year will be tough.
They are going to generate free cash flow in 1H 2020, which should keep the creditors off their back. A rebound in NGL prices would be very good sign.

Gulfport's production guidance is for a 20% decline in produced volumes YOY in 2020, so I am dropping it from our Small-Cap Growth Portfolio.

From January 21 to February 10, three analysts have published reports on GPOR. They all have price targets of $2.00. I agree their valuations are reasonable (assuming natural gas bounces back to around $2.50 by Q4 2020). The problem is that no investors are interested in the "gassers" these days.

I've posted my forecast/valuation model to the EPG website.

[GeraldR]

GPOR is trading like bankruptcy is likely. You mention that cash flow in first half of 2020 should "keep the creditors off their back". How much danger of GPOR going tits up do you see? Any comments appreciated.

[dan_s]

Take a look at row 53 of the forecast model.

If they can keep generating FCF from operations they should survive. If ngas doesn't get back to $2.50 by year-end Gulfport (and all of the gassers") will have difficulty.

Most companies are forced into Chapter 11 by pissed off vendors, so keeping up with trade payable is very important and making steady interest payments on the credit line and LT debt. Operating cash flow on row 53 is net of current expenses (trade payables) and interest payments.

Download the model and put $3.00 for the natural gas price for 2021. That will show you the upside if we can get natural gas prices back where they belong.

[GeraldR]

Thanks.