Energy Prospectus

OKLAHOMA CITY, Nov. 01, 2017 (GLOBE NEWSWIRE) -- Gulfport Energy Corporation (GPOR) (“Gulfport” or the “Company”) today reported financial and operational results for the quarter and nine-months ended September 30, 2017 and provided an update on its 2017 activities. Key information for the third quarter of 2017 includes the following:

Net production averaged 1,199.6 MMcfe per day. < Above my forecast of 1,122,480 Mcfe per day (187,080 BOE per day)
Reiterated 2017 full-year production guidance of 1,065 MMcfe to 1,100 MMcfe per day.
Net income of $18.2 million, or $0.10 per diluted share.
Adjusted net income of $58.0 million, or $0.32 per diluted share. < My forecast was $69.9 million, or $0.38 per share
Adjusted EBITDA (as defined and reconciled below) of $195.0 million.
Reduced unit lease operating expense for the third quarter of 2017 by 17% to $0.18 per Mcfe from $0.22 per Mcfe for the second quarter of 2017.
Reduced unit general and administrative expense for the third quarter of 2017 by 9% to $0.12 per Mcfe from $0.13 per Mcfe for the second quarter of 2017.
Added 10,700 acres in the Utica Shale, 4,100 acres in the SCOOP and increased NRI on over 5,000 acres by approximately 8% in the Utica Shale during the nine-months ended September 30, 2017.
Additional leasehold acquisition and acreage trading efforts year-to-date have increased working interest on wells spud during 2017, totaling an incremental 22.0 net wells spud in 2017 when compared to the midpoint of the previously provided guidance range.
Budgeted 2017 total capital expenditures now forecasted to be approximately $1.16 billion. < Slightly higher than previous estimates
Gulfport's lead lenders have proposed an increase to Gulfport's borrowing base from $1.0 billion to $1.2 billion, subject to the approval of the additional banks within the syndicate, with elected commitments to total $1.0 billion.
Increased hedge position to approximately 629 BBtu per day of natural gas fixed price swaps during 2017 at an average fixed price of $3.19 per MMBtu and a large base level of 898 BBtu per day of natural gas fixed price swaps during 2018 at an average fixed price of $3.06 per MMBtu.

Chief Executive Officer and President, Michael G. Moore, commented, "Gulfport produced approximately 1.2 billion cubic feet of gas equivalent per day during the third quarter of 2017, representing 16% production growth over the second quarter of 2017 and 63% growth over the third quarter of 2016. Our solid production results year-to-date are driven by the continued strong performance of both our Utica Shale and SCOOP assets and bolstered by an active turn-in-line schedule year-to-date in both plays. As we head into 2018, we are committed to a disciplined capital program and remain focused on cash flow neutrality for the 2018 calendar year, aligning drilling and completion capital to operational cash flow, which at today’s strip price, we continue to estimate would generate approximately 30% growth year-over-year."
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A company with 30% annual production growth locked in s/b trading at a higher multiple of operating cash flow per share. Wall Street fund managers just have no interest in the "gassers" these day. - Dan

In the last 3 months, 9 ranked analysts set 12-month price targets for GPOR. The average price target among the analysts is $20.00. High of $25 and Low of $18.

Several things that should work in Gulfport's favor in 2018:
1. Wellhead gas and NGL prices in the Utica should be improving in 2018 because of access to better markets as more pipelines come on-line. This has been confirmed by AR and RRC.
2. Gulfport should pick up the pace of well completions in SCOOP. They did a lot of testing on their first dozen wells and they will have a better defined development drilling program in 2018.
3. Gulfport out spent operating cash flow in 2017, which the market hates. Cash flow from operations should be approximately $850 million in 2018, more than enough to fund their drilling program.
4. More SCOOP wells should increase the percentage of their production that is liquids. NGL prices should be a lot higher in 2018.
5. Gulfport has publicly stated that they can increase production by 30% in 2018 while living within cash flow. This is impressive and should draw market attention.
6. Their year-end 2017 reserves report should show a big increase in proven reserves thanks to this year's drilling program and higher commodity prices.

I have updated my forecast / valuation model for GPOR and it will be posted to the EPG website. My valuation is $30.50/share. It is based on 8X the average operating cash flow for 2016 to 2018. That is a low multiple for a company with a strong balance sheet and lots of low risk running room. On March 3, 2017 Credit Suisse published a report on GPOR (when gas prices were lower than they are today) and valued it at $33/share. IMO Gulfport is in much better shape today than it was a year ago.

Gulfport will have added 31 DUC wells by end of year. Do you know if their plans include accelerating completions in the first quarter of 2018?

Production will increase by at least 30% YOY in 2018. I think they are adding a dedicated completion crew in SCOOP. Completions in Utica depend somewhat on midstream takeaway capacity.

Read the profile on Gulfport that we sent out December 1. Your answer is on page 2.