EUR 850.00 For Business Accounts Only

Morningstar | Gulfport Is Developing Natural Gas Resources in the Utica and SCOOP Plays

Gulfport Energy is a natural gas producer with key assets in the Utica Shale and the South Central Oklahoma Oil Province, or SCOOP. It also holds a noncontrolling interest in Mammoth Energy Services, although this publicly traded noncore investment is likely to be sold. The proceeds, approximately $300 million, will probably go toward Gulfport's $400 million share-repurchase program.Returning cash to shareholders has become a priority for Gulfport, now that the company has transitioned into the harvest phase after delineating its assets and scaling its production. Until recently, the firm was outspending to expand the business, but management is now prioritizing returns and cash flows while keeping production stable. Management does not believe higher commodity prices are sustainable, at least in the short run, and any windfall from higher prices will be used to accelerate repurchases or manage the balance sheet instead of ramping up drilling.Gulfport's natural gas assets cannot compete with lower-cost resources in the northeast Marcellus, but they still break even below our $3 per thousand cubic feet midcycle forecast. The SCOOP area contains several stacked reservoirs. The Woodford Shale has a high natural gas content where Gulfport is operating, but the overlying Sycamore and Springer intervals contain oil as well. The geology of this play is complex and the reservoir is relatively deep, which means the development cost is much higher than it is in other shale plays. But initial production rates are typically high as well, justifying the additional outlay (to an extent). This is probably the more attractive of the two assets in Gulfport's portfolio and will receive the lion's share of Gulfport's capital going forward (except in 2019, as the firm will work down its drilled uncompleted well inventory in the Utica).