Giulfport Energy - Q1 Results BEAT MY FORECAST

[dan_s]

On May 08, 2017 -- Gulfport Energy Corporation (NASDAQ:GPOR) (“Gulfport” or the “Company”) reported financial and operational results for the quarter ended March 31, 2017 and provided an update on its 2017 activities. Key information for the first quarter of 2017 includes the following:

> Net production averaged 849.6 MMcfe per day, an 8% increase over the fourth quarter of 2016 and a 23% increase versus the first quarter of 2016. < ABOVE MY FORECAST
> Net income of $154.5 million, or $0.91 per diluted share.
> Adjusted net income of $53.9 million, or $0.32 per diluted share. < COMPARES TO MY FORECAST OF $0.17
> Adjusted EBITDA (as defined and reconciled below) of $143.6 million.
> Reduced unit lease operating expense for the first quarter of 2017 by 9% to $0.25 per Mcfe from $0.28 per Mcfe for the fourth quarter of 2016.
> Closed acquisition of core SCOOP assets from Vitruvian II Woodford, LLC ("Vitruvian") on February 17, 2017.
> Increasing expected realized oil price and now estimate that the Company's 2017 realized oil price will be in the range of $3.75 to $4.75 per barrel below WTI.
> Increasing expected realized natural gas liquids price and now estimate that the Company's 2017 realized natural gas liquids price will be approximately 45% of WTI.
> Recent two-well wet gas pad in southern Grady County, OK turned-to-sales with the Vinson 2-22X27H averaging a 24-hour initial production rate of 14.6 MMcf per day and 57 barrels of oil per day and the Vinson 3R-22X27H averaging a 24-hour initial production rate of 16.9 MMcf per day and 48 barrels of oil per day.
> Expect to spud both a Springer and Sycamore location in the SCOOP during the summer of 2017.

Chief Executive Officer and President, Michael G. Moore commented, "The first quarter was an eventful quarter for Gulfport, experiencing yet another solid quarter operationally, driven by our assets in the Utica Shale and closing of the acquisition of the SCOOP assets from Vitruvian, which provides Gulfport sizeable core positions in two of North America’s lowest cost natural gas basins. Subsequent to the quarter, we completed and turned-to-sales two gross SCOOP wells located in the wet gas window in Southern Grady County, marking Gulfport’s first completions in the play. We have witnessed several key indicators during the flowback of the wells that indicate these wells to be top performers relative to their offsets, outperforming the average of direct offset producers by approximately 30% and outperforming our current SCOOP wet gas type curve by as much as 35%. Bear in mind, we are still early in the flowback process and would expect these wells to continue to clean up and potentially improve further beyond the rates provided today. We are extremely pleased with the results from these new wells and would expect both of the wells to rank among the top wells completed in the play to date."
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Gulfport's share price will be driven by their SCOOP results and natural gas prices. First Call's target price is $28.64 and Credit Suisse values it at $33.00. My valuation will be higher.

[dan_s]

I have updated my forecast model for Gulfport and it will be posted to the website this evening (5/10).

First quarter numbers were slightly better than expected and Gulfport should post a big increase in production from Q1 to Q2 as they will have a full quarter of SCOOP production in Q2. Production should jump from 141,594 BOE per day in Q1 to approximately 176,000 BOE per day in Q2. If the company can combine the production surge with good well results in SCOOP, investors should flock back to this oversold company. Q2 will remove a lot of uncertainty on this one.

My valuation stays at $40/share, which compares to First Call's price target of $28.64. Credit Suisse likes it at a valuation of $33.00.

Take a hard look at the RED BOX on the forecast model and you will quickly understand why there is a lot of upside on this one.

There are several midstream projects coming online late this year that could push down the differentials in Eastern Ohio and raise the realized ngas price for GPOR beyond the $3.00/mcf that I am using in my forecast for 2018. Also, Credit Suisse is using ~9% higher production volumes in their forecast model than I am using for 2018.

Antero Resources commented on the improved takeaway capacity in Ohio (Utica Shale) during their conference call.