Gulfport - Top "Gasser"

[dan_s]

Gulfport Energy (GPOR) is much smaller than the other two "gassers" in our Sweet 16, so it has more risk. However, this stock should draw a lot of attention as it becomes crystal clear to the Wall Street Gang in Q3 that the U.S. gas market is going to be MUCH TIGHTER than it was heading into last winter. I mean A HELL OF A LOT TIGHTER.

On June 16th (per EIA) the U.S. natural gas storage was 324 Bcf lower than it was a year ago. In the last 14 weeks, the delta to the 5-year average has been cut in half and storage is now 207 Bcf above the 5-year average. Credit Suisse estimates that storage will dip below the 5-year average before the next winter heating season begins. If July and August are HOT then storage levels be much lower and I think we will see draws fro storage in late July. The U.S. gas market is more than 10 Bcf per day larger than it was five years ago.

In just the last two weeks, First Call's forecasts for Gulfport's EPS and operating CFPS have moved very close to my forecast. In fact, FC operating cash flow per share forecasts have moved above my forecasts for Q2 and Q3.

Gulfport's production is now on-track to increase by 50% year-over-year in 2017. Credit Suisse's last report on GPOR shows another 40% YOY increase in 2018.

Gulfport has very little exposure to falling oil prices.
> Production mix is approximately 88% natural gas, 8% NGLs and only 4% crude oil.
> ~80% of their 2017 oil production is hedged at ~$54/bbl
> If I reduce the oil price to $40 for all future periods, it only lowers my valuation by 67 cents.

My valuation of GPOR is $40.00
Credit Suisse values it at $33.00
First Call's price target is $24.02

A bit more risk than AR and RRC, but a lot of upside potential on this "Aggressive Growth" company.

You can view my updated forecast/valuation model for GPOR on the EPG website under the Sweet 16 tab.