Morningstar | Prioritizing Margins, Gulfport is Targeting Flat Production in 2019
Gulfport Energy delivered production of 1,393 mmcfe/d in the fourth quarter, which was 10% higher than in the equivalent prior year period but 2% lower sequentially. The decrease was consistent with the sharply truncated completion plan announced after the previous quarter. As a result, full-year volumes of 1,360 mmcfe/d were in line with guidance, albeit at the low end of the range. The firm’s financial results were a hair below Street expectations, with adjusted EBITDA and adjusted earnings per share coming in at $247 million and $0.46, respectively (consensus estimates were $249 million and $1.61).Management set a precedent for disciplined capital allocation in 2018 by dropping rigs in the back half of the year to make absolutely sure the firm stayed within budget. And it will be no less frugal in 2019. In anticipation of a challenging commodity environment the firm is prioritizing margins and returns rather than growth. Accordingly, the budget has been set at $565-600 million (down 29% at the midpoint versus last year). At that level production is expected to trend flat relative to the fourth quarter. 90% of those volumes have been hedged at  $2.83/MMBtu, resulting in free cash flows of $100 million. These are likely to be redeployed, along with the proceeds of certain divestitures--most likely the company’s $230 million stake in Mammoth Energy Services--to fund a newly authorized $400 million share repurchase program.
We plan to incorporate these operating and financial results in our model shortly, but after this first look our fair value estimate and no-moat rating remain unchanged.
Gulfport Energy is an oil and natural gas exploration and production company focused on the exploration, exploitation, acquisition and production of natural gas, crude oil and natural gas liquids. The company's principal properties are located in the Utica Shale primarily in Eastern Ohio and the SCOOP Woodford and SCOOP Springer plays in Oklahoma. In addition, among other interests, the company holds an acreage position along the Louisiana Gulf Coast in the West Cote Blanche Bay and Hackberry fields, an acreage position in the Alberta oil sands in Canada through its interest in Grizzly Oil Sands ULC and an equity interest in Mammoth Energy Services, Inc., an oil field services company.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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