Energy Prospectus

Analyst Actions: Credit Suisse Reinstates Gulfport Energy at Outperform; PT Raised to $72.00 06/12 10:34 AM

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11:34 AM EDT, 06/12/2013 (MidnightTrader) -- Shares of Gulfport Energy Corp (GPOR:$49.385,0$0.485,00.99%) are up 1.2% after Credit Suisse reinstated coverage of the stock with an Outperform rating and raised its price target to $72 from $59.

If Gulfport hits the production levels in my forecast model, which match the company guidance, it will be going a lot higher.

Gulfport has been heavily weighted to crude oil. The new Utica Shale wells will produce a lot more gas and NGLs but the bulk of their revenues will continue to be from oil sales.

more from cs

Analyst Actions: Gulfport Energy Corp Coverage Reinstated With Outperform, TP of $72 at Credit Suisse 06/12 12:44 PM

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01:44 PM EDT, 06/12/2013 (MidnightTrader) -- Credit Suisse says: "Bring On the Utica Growth; REINSTATING Coverage with an OUTPERFORM Rating and TP of $72 (prev $59)."

Reinstate with Outperform and TP of $72. "We reinstate coverage of GPOR with an Outperform rating and raise our target price to $72 (from $59 prior to restriction) as we account for additional Utica inventory in our NAV estimate (from ~350 to ~500 net locations) driven by the quicker than anticipated ramp to a seven-rig program. We adjust our 2013/14/15 EPS estimates -7%/+4%/+19% on our lower 2013 production estimate (18.5 MBoe/d from 20.7 MBoe/d) due to infrastructure delays, but higher 2014/15 production on Utica acceleration, as well as further cost leverage with the expected production ramp.

Production Risks Discounted. "While aggressive 2013 production guidance (200-212% production growth) remains a big push-back on the story, our estimate of below guidance production (18.5 MBoe/d vs. reaffirmed guidance of 21.4-22.4 MBoe/d) is due entirely to delayed infrastructure, and we argue expectations for a production miss are already discounted in the stock. The infrastructure issues are getting ironed out near-term with the recent startup of MWE's Cadiz I processing plant (125MMcf/d of cryogenic capacity), the Seneca I and II plants (400 MMcf/d of capacity) scheduled for 4Q13 startup and additional gas processing and fractionation expected in 2014. As a result of the rapid shift from exploration to development in the southern Utica core paired with the infrastructure build out we estimate GPOR is capable of delivering production growth at a ~140% CAGR through 2015."

Valuation. GPOR trades at a 32% discount to our revised 'PD-Plus' NAV estimate compared to a 10% discount for its peers. On EV/EBITDA (unhedged, futures strip), GPOR trades 12.5x 2013E and 4.5x 2014E vs. the peer group at 6.3x and 4.8x, respectively.

Price: 48.85, Change: -0.05, Percent Change: -0.1

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Great to see other analysts see what I see. I definitely rate GPOR a Strong Buy under $50 and believe the Credit Suisse price target of $72 is possible within a year.

gpor is taking it on the chin today--much more than its share, imo. maybe last opportunity to buy under 50.

I got an E&P report from Credit Suisse today that was very bullish for GPOR. They rate the Liquids Rich Utica Shale in eastern Ohio as second only to the "Super Rich Marcellus" for economic return based on their commodity price forecast.

CS points out and I agree with them on this, that Gulfport's aggressive production guidance (reaffirmed at 21.4 to 22.4 MBoe/d) is actually holding the stock down. If Gulfport does miss their guidance it will entirely due to delayed infrastructure and nothing to do with the wells. Based on MWE's update, the infrastructure is moving ahead on schedule.

CS believes GPOR will drill 55-60 Utica wells in 2013 and add ~120 gross horizontal wells in 2014. That program will result in a HUGE addition to proven reserves over the next 18 months. Don't forecast they have significant equity in Grizzly Oil Sands and Diamondback Energy (FANG).

Buying GPOR on dips like today makes sense to me.

From the CS report: "Stacking Up the Return Profile; Beyond rates-of-return, we also underscore the importance of the ability to multiply that return profile across an asset base. We take our basin economics analysis a step further and provide another perspective on asset valuation by taking into account spacing and stacked resource potential to get to a value per acre estimate
for the current most active basins. While the Super-Rich Marcellus, Liquids-Rich Eagle Ford and Liquids-Rich Utica wells provide higher project rates of return, we estimate that the Midland Permian, Niobrara Wattenberg provide a higher undiscounted value per acre driven by the stacked potential and spacing of the plays."

This is why I moved CXO into the Sweet 16.