Gulfport Energy Corporation Price & Performance (GPOR)

Net cash provided by operating activities before changes in working capital totaled approximately $185,000,000 during the fourth quarter more than triple our capital expenditures for the quarter and allowing us to make significant common share repurchases all while maintaining our balance sheet strength. Reported adjusted EBITDA of $2.00 $3,000,000 during the quarter, generated adjusted free cash flow of $125,000,000 for the same period. Driven by robust natural gas pricing, strong liquids production and our operating cost excellence. Said another way, we delivered our best quarter of 2024 from an adjusted free cash flow perspective and utilize the resulting cash to add incremental high quality inventory through our share repurchase program. Needless to say, it was an outstanding quarter for Gulfport. Cash operating costs for the fourth quarter totaled $1.19 per million cubic feet equivalent better than analyst expectations and within our full year 2020 In addition, we are pleased to announce that we reached an agreement in early twenty twenty five with a high quality midstream provider for the gathering, processing and fractionation of our Marcellus development we'll have that solution in place for the upcoming four well Marcellus turn in line planned for mid-twenty twenty five. Enhancing the development economics by enabling the extraction and of our valuable NGLs The company's focus on more liquids rich activity and the resulting higher weighting of our liquids in our production mix will lead to a slight increase in our $20.25 per unit LOE and midstream including gathering, processing, transportation and compression costs.

Over full year 2024 and we currently forecast per unit operating costs will total in the range of 1 point to $1.29 per Mcfe. Despite these slightly elevated costs, it is important to highlight that this increase is more than offset by the strong margin performance and value contribution from liquids. Leading ultimately to improved cash flows. Our all in realized price for the fourth quarter was $3.36 per Mcfe, including the impact of cash settled derivatives. This realized unit price is a $0.57 premium to NYMEX Henry Hub index prices driven by a differentiated 2024 hedge position, diverse marketing portfolio for natural gas and the pricing uplift from our liquids portfolio in both of our asset areas. We realized a cash hedging gain of approximately $42,000,000 for the quarter demonstrating the value of our 2024 hedge book and its effectiveness in bolstering our cash flows. With respect to our current hedge position, we have downside protection covering roughly 50% of our 2025 natural gas production at an average floor price of $3.62 per MMBtu. Securing a baseline amount of our forecasted free cash flow generation. That said, we remain constructive on gas prices in 2020 carefully choosing to maintain significant upside by utilizing collar structures on nearly half of those downside hedges in 2025 that allow us to participate in prices above $4 per MMBtu.

We have strategically positioned our hedge book in both 2025 and 2026 with less overall production hedged with a significant portion of callers in our overall hedge book, as we have been believers in improving gas macro for 2025 and beyond for some time now, On the basis front, continue to lock in our natural gas basis exposure providing pricing security at our largest sales points in addition to the risk mitigation our diverse of firm transportation offers. We provide further details of our full derivative position on Slide 22 of our investor presentation and later today when we expect to file our 10 ks. Turning to the balance sheet, our financial position remains very strong with trailing twelve month twelve month net leverage ending the year below one times. As of 12/31/2024, our liquidity totaled $900,000,000 comprised of $1,500,000 of cash plus $898,200,000 of borrowing base availability. Our liquidity today is more than sufficient to fund any development needs we might have for foreseeable future provides tremendous flexibility from a financial perspective going forward. With respect to EBITDA and adjusted free cash flow generation, the recent rise in natural gas prices along with our continuous operational improvements and more efficient capital program, position 2025 to be a flow perspective.

Based on current strip pricing with we forecast our adjusted free cash flow should accelerate throughout the year and has the potential to more than double compared to 2024 all while our net leverage organically declines. Further strengthening our already top tier relative to our natural gas peers. During the fourth quarter, we repurchased approximately hundred and 91,000 shares of common stock for about $880,000,000 which includes direct repurchases of common stock from our largest shareholder totaling [indiscernible] Allowed us to capture larger blocks of unrecognized equity value at a discount to market prices without impacting our public float. As of February 20 and since the inception of the program, we have repurchased approximately 5,000,000 shares of common stock at an average price of $105.57 lowering our share count by 17% at a weighted average price nearly 41% below today's opening share price. We currently have approximately $4.00 $7,000,000 available under the $1,000,000,000 share repurchase program and remain steadfast in our free cash outlook free cash flow allocation framework to continue to return substantially all of our adjusted free cash flow excluding discretionary acreage acquisitions, to our shareholders through common stock repurchases. Turning to our year end reserves, while the lower commodity price environment impacted our overall SEC reserve volumes, the company's proved reserve base increased by approximately 6% when excluding the impact of pricing revisions through the addition of new reserves positive performance revisions, increases in working interest as a result of our successful leasing efforts, and continued efficiencies in our operation.

Utilizing our 2024 reserve Gulfport, at a flat $3.5 per MMBtu and $70 per per barrel of oil case and keeping in mind that the reserve report is limited five years of development, our PV-ten value totaled approximately $3,800,000,000 significant uplift from the SEC pricing case that is run at $2.13 per mMBtu and $76.32 per barrel of oil. In addition, the PV-ten value of the twenty twenty four year end proved reserve represents an increase to the PV-ten value of the 2023 proved reserves at the same flat price case. Which is a reflection of the high quality inventory additions months. Similar to the third quarter of twenty twenty four, under the full cost method of accounting, for oil and gas properties, we were required to record a non cash impairment during the fourth quarter based upon the future value of our reserves utilizing the low SEC natural gas price I mentioned previously. However, the underlying value of our assets remains strong as evidenced by the PV-ten value of the reserve report at the flat price case I just mentioned. And we remain confident in the long term In summary, 2024 was a strong year for Gulfport Gulfport our results reflect consistent theme that we continue to reiterate.

The team's exceptional operational performance continues to deliver superior results while maintaining a healthy financial position. As we look ahead to 2025 and as John already mentioned, the combination of our optimized development program and the improving commodity price environment provides Gulfport with the ability to deliver meaningful growth in free cash flow generation And as shown on Slide six of our investor presentation, we continue to generate premium free cash flow yields relative to our peers with the five year free cash flow capacity capable of retiring our market cap at its current level. With that, I will turn the call back over to the operator to open up the call for questions. Thank you.

Will now be conducting a question and answer session. Participants using speaker equipment, it may be necessary The first question comes from the line of Bert Tonus with Tuohy Securities. Please go ahead. Hi, good morning guys. The new liquids volume that you outlined for full year 2025 looks fairly strong, certainly versus us in the [indiscernible] Could you maybe talk about if that's a peak level or can you hold it flat or maybe even grow it with your current assets? And then to make it simple on the operator, I'm going to bundle my second question into this. Does the liquids growth and focus change the way you're looking at potential bolt ons on a gas versus liquids basis? And does it make more sense to focus on PDP heavy or undeveloped assets? Yes. Hey, Bert, this is Michael. I'll take the first part and then I think John can handle the second part of that question. I think the liquids growth, the 30% that we talked about is is sustainable, absolutely. I think as you look in our investor deck, we've got a slide that lays out the cadence of our production profile for the year. I think the liquids will generally follow that same shape Because of the timing of the turn in lines, we may be a little bit oilier early in the year.

With that liquids production, we may be a little bit more NGL heavy later in the year. But as we look out into the future, we certainly have a lot of development this year in the liquids windows. And expect that going forward, we have the option again to continue to allocate towards those areas and deliver more liquids should we choose to do that. But the nice thing that we've talked about over and over again we have that flexibility to move between windows and this year, it's going to be a bit liquids rich, but we'll monitor the macro on the gas side as well and we can certainly pivot there. So I'll let John take second part of that question.

Yes, Bert. Thanks again for the question this morning. I think if you look historically at where the company has allocated its free cash flow and with acreage inventory additions, which the thesis behind that really is to use the execution prowess of the team and the great performance by the team to extract value with its undeveloped acreage. So as you think about bolt on opportunities that may arise throughout the year, What I would tell you is while PDP is somewhat attractive, What would really be attractive to the company is the sizable undeveloped portion of any kind of bolt on opportunity that may present itself. And it's the same philosophy as we allocate capital towards the discretionary acreage. It's really just using the prowess of the team to extract value from that.

Hopefully that answers your question in and certainly appreciate it. Certainly does. Thanks, team.

Mr. Jonas, are you done with the question? Yes, bundled them both in there. Thank you.

Thank you.

Next question comes from the line of Tim Rizzo with Hi. This is John on for Tim. Thanks for taking our questions. Looks like you'll be turning in line around 30% more lateral footage on just 6% higher G and C costs this year. Is on top of what looks like shorter laterals for some of the TILs this year. We're wondering, do you see this front loaded CapEx program as conducive to driving [indiscernible] capital efficiencies further And do you see it as the norm in the years ahead? [indiscernible] I appreciate the question, John. And the team has been very focused and we remain very focused on capital efficient It's The return on the cash in as we assess various development options. So front loaded capital programs certainly deliver that. And I'll tell you that a lot of care and time is goes into whenever we plan out and develop these the timing of the turn in line specifically what window of maturity you turn in line at what time. To maximize the value of the company for the cash flows throughout the year. So yes, I think whenever you look at things from a capital efficiency perspective, that front loaded capital program, generally speaking, we've been consistent with that through the last couple of years and I would envision us being consistent with that for the foreseeable future.

Okay. That's helpful. If I could squeeze in one more. Given your potential to generate significant free cash flow this year, it looks like to the tune of 400 to $500,000,000 or so How do you think about future capital allocation Maybe what does the market look like for medium sized asset packages and the $100,000,000 range or so and are you comfortable with just returning the majority of this cash as repurchases? Yes. Hey, this is Michael. I'll take the question. Thanks, John. I think our framework has been really effective for us, right? I think we we meet with our Board and continuously assess all the options for our free cash flow and look at those on a rate of return basis and [indiscernible] Which ones we think actually deliver the best result for our shareholders. And over the last couple of years, adding to the inventory of the company and buying the shares has both been extremely successful. And so I think that's front and center for us. That said, we always assess opportunities. There's packages around in the market that are small, medium sized, large. They have PDP components. They have undeveloped components as John talked about on the last question.

And so we take a look at those. But I think again with where we feel like our equity trades and value that we think is still unrecognized, along with the opportunity organically to go out and add locations those are high bars to clear. So we'll continue to assess those things. I think there's always those other options out there. And if the right thing comes along, then certainly look at it. But feel like what we've done so far is making a lot of sense for us and likely to continue that as we go That makes sense. Appreciate the time.

Thank you. Next question comes from the line of Carlos Escalante with Wolfe Research. Please go ahead.

Hey, good morning, guys. How are you guys doing? Congratulations, Matt, first of all. I'm starting there purposely because my question is to you.

Part of the job. If I take the Lake 7 pad as a proxy, guys, [indiscernible] I see how you opened the tabs on day 120 And all that it means regarding the pressure drawdown in productivity, Does that say anything? Or does that invite you to perhaps how you frame your Utica development moving forward. Versus what you did with the late seven pad specifically?

Yes. Thanks, Carlos. Appreciate that.

It certainly does. I think it's something that we've talked about a long time on the choke managed program in the Utica dry gas.

Certainly something we've believed in the liquids window tested that out on the lake as you noted after one hundred and twenty days started to increase those rates a little bit more.

I think it's well known in the public space that there's other peers out there that open them more aggressively. So for us, it was an ideal time to test incrementally higher rates to understand what that drawdown looks like and understand how that condensate yield reacts. I think we were very encouraged by the results of that over the last several months and have currently opened up a few other wells on that pad as well. So I fully would expect us to slightly tweak, I would say, expectations moving forward on new development in that area. Probably somewhere in between, but certainly for us something that we'll lean into a little bit more on the type curve shape. Wonderful. Thank you, Matt.

My second question is regarding your cadence on your your allocation to your different five operational areas. So you're very specific obviously in how you intend to allocate your capital this year. And it comes to attention that you're signaling on the Marcellus specifically, is for eight drilled wells and you're only turning in line four, However, when you signal to the market you're inventory that for Marcellus you mentioned incremental two years. And that's based on a cadence of 25, 20 wells, right? So wonder why you've decided to take the approach of signaling the Marcellus specifically this way when in reality if I take twenty twenty five as a proxy [indiscernible] presumably less And if so, is there a change in 26 that we could expect to see knowing that obviously you're monitoring the macro at all times?

Yes. Hey Carlos, this is Michael. It's a good question. When we talk about in [indiscernible] you're right in the Marcellus, we have call it 50 to 65 locations and on a corporate perspective where we develop 20 to 25 wells a year, that's two plus two point five years of inventory. In that area, specifically though, we're looking to develop like you mentioned eight wells, drill eight wells this year turn in line four.

There's all kinds of factors that go into that capital allocation being one of them.

We have a new midstream partner in there. Of course, we've got those guys have to delay lines to our pads and we've got to develop in a responsible and prudent way. And And so in any given area, we're going to be developing at a different pace. And so rather than constantly talk about inventory in different windows in different manners, we just talk about it terms of corporate inventory. But the reality is we'll be developing that Marcellus asset over the next call it, five to six to seven years. Utilizing those locations that I just laid out. So two point five years, I'd call it it a corporate inventory, but yes, certainly going to be in that area for longer than that.

Wonderful. Thank you, guys.

Thank you. Next question comes from the line of Brian Belly with Capital One Securities. Please go ahead.

Good morning, everybody. Thanks for taking my questions.

Just a one here. I'm trying to get a sense for Till cadence throughout the year. I know that oil kind of starts to pick up really in earnest and second quarter, NGLs follow more in the third quarter.

But it appears that from a footage standpoint, you're going to tell a similar amount of of footage in 2025 as you did in 2024.

On the dry gas side. But we're seeing, of course, I assume it's the cadence of when those tilts come online on the dry gas side because it feels like there would be quite a bit of pent up production on the gas side heading into pretty early twenty twenty six. Is that something that not to get too far ahead of ourselves with 2026 talk, but something that we should kind of think about heading into '26 or are those kind of in your hip pocket 04/26 to determine how you want to bring those on. Yes, Brian, it's a great question. This is John. To your point with the turn in line cadence, generally speaking, a front load of capital program, what you'll find is the production will increase throughout the year. Now that does vary depending on what maturity and what types of wells you're bringing on. For instance, if you're bringing on on a lot of dry gas wells, those generally have six to nine to twelve months plateau periods certainly play in. If you're drilling liquids wells, they have a little bit shorter plateau period. But nonetheless, we try to optimize timing of those to impact production.

So you're going to net Q4 lead into a little bit stronger production profiles for those quarters. Generally speaking. This particular year, the function of our Q1 volumes was simply just natural decline. Quarter on quarter primarily. And then you'll see the cadence of that production tick up as you move throughout the year. So I wouldn't really want to comment on '26 yet simply because there's still a lot of optimization for the program to do yet. But you're absolutely correct that we're positioning the company very well towards Q3, Q4 in a very constructive commodity environment for [indiscernible] Okay. Thanks. And then I guess with that lever to grow there, the implications for capital efficiency that you picked up in 2025 Do you still see any remaining low hanging fruit? I mean, you can only complete for so many hours in a twenty four hour day, you're pretty close to the cap. But is there anything else that maybe we could look forward to or hear more about No, I appreciate the question. I won't put Matt on the spot too much, but what I'll tell you is that the industry never ceases to amaze me on on its continuous improvement.

Things that we're doing now, we wouldn't have thought eight years ago on efficiencies that we could possibly do. And that's a function of just technologies available and just getting better at what we do on the ground for efficiencies to grow. Having said that, we're very proud of the accomplishments with the well cost and the efficiency reductions over the past couple of years because it's really added tremendous value to the fundamental core business. So I suspect there's more to come, probably more moderate gains versus these ten percent and twenty percenters that we're talking about.

But guys out in the field never ceased to surprise me with some upside there. So certainly appreciate the question and Matt's got his work cut out for him to continuously improve on this performance.

Got it. Thank you very much for the color John. We appreciate it. Thanks a lot, Brian. Thanks, Brian.

Thank you. Next question comes from the line of Noah Hunginis with Bank of America. Please go ahead.

Good morning, everyone. I was just hoping for my first question guys could kind of walk me through Slide six. I think the main thing that really sticks out to us here is your ability to maintain your natural gas leverage to a constructive macro outlook while increasing liquids production. Are we kind of thinking about that the right way?

Yes, I think so. No, this is Michael. I mean, I think again, this slide is really an indication of the potential of the company over the next five years. So we've been pretty careful not to call it guidance because we allocate capital in a very dynamic fashion as we talked about. And so we may see liquids cuts change over the years. We may see us become a little more gas weighted depending on where the macro goes.

But we take the midpoint of our current year guidance and we run it out for five years and we demonstrate that without any real aggressive assumptions, you can see that the business is capable of generating tremendous amount of free cash flow over the next few years. So again, Matt is going to probably deliver better capital results, we hope, over time. And think there's things we can do operationally to improve on the cash costs and potentially deliver better realizations on some of these numbers. But I think, yes, the answer to your question is, we think a pretty compelling indication of what we're capable of.

Great to hear. And then for my second question, I was just kind of hoping you guys could talk about what's underwriting your change in your NGL realizations. I saw it got bumped up quite a bit here. Is that just because of the wells that you're turning in line this year?

Yes, it's a good question. So a couple of things there. First of all, I want to highlight that we have a really attractive barrel, especially in Appalachia. So our existing Utica production actually is part of a a contract where we reject ethane. And so we've always had a strong barrel, I would call it, there just given the fact that that ethane can doesn't exist, we get a gas BTU uplift from the ethane value. And then then as you've seen propane prices and butane prices both increase, with some of the weather we've had and some of the other demand factors relative to WTI. That certainly pulls up on that percent of WTI realization. And then lastly, we announced this morning our new Marcellus agreement. And so we've been able to negotiate some favorable terms there as well, which again relates to ethane and will allow us to continue to have what we think is a differentiated NGL barrel versus what a typical Bellevue barrel looks like. So just a function of our marketing team's negotiations and some really good outcomes that we've seen in those areas.

Great. Thanks so much.

Thanks.

Thank you. As there are no further questions, ladies and gentlemen, we have reached the end of question and answer session. I would now like to turn the floor over to John Reinhart for closing comments.

Yes. Thank you for taking the time to join our call today. Should you have any questions, please don't hesitate to reach out to our Investor Relations team. Hope you have a great day. This concludes our call.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time.