Gulfport Energy(GPOR) - 2024 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION This section provides Gulfport Energy Corporation's unaudited consolidated financial statements and management's discussion and analysis Item 1. Consolidated Financial Statements (Unaudited) This section presents Gulfport Energy Corporation's unaudited consolidated financial statements and related notes for Q3 2024 and 2023 Consolidated Balance Sheets This section provides a summary of the company's financial position, including assets, liabilities, and equity Key Balance Sheet Metrics | Metric | September 30, 2024 ($ thousands) | December 31, 2023 ($ thousands) | | :----- | :------------------------------- | :------------------------------ | | Total Assets | $3,178,156 | $3,267,613 | | Total Liabilities | $1,078,171 | $1,061,719 | | Total Stockholders' Equity | $2,056,240 | $2,161,680 | - Total assets decreased by approximately $89.5 million from December 31, 2023, to September 30, 2024, while total liabilities increased by approximately $16.4 million[14] Consolidated Statements of Operations This section details the company's financial performance, including revenues, expenses, and net income or loss Statements of Operations (Three Months Ended Sep 30) | Metric | Three Months Ended Sep 30, 2024 ($ thousands) | Three Months Ended Sep 30, 2023 ($ thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Total Revenues | $253,912 | $266,667 | | Total Operating Expenses | $239,325 | $199,483 | | Income From Operations | $14,587 | $67,184 | | Net (Loss) Income | $(13,967) | $608,444 | | Net (Loss) Income Attributable to Common Stockholders | $(15,060) | $517,555 | | Basic EPS | $(0.83) | $27.72 | | Diluted EPS | $(0.83) | $27.37 | Statements of Operations (Nine Months Ended Sep 30) | Metric | Nine Months Ended Sep 30, 2024 ($ thousands) | Nine Months Ended Sep 30, 2023 ($ thousands) | | :----- | :----------------------------------------- | :----------------------------------------- | | Total Revenues | $718,258 | $1,302,594 | | Total Operating Expenses | $640,024 | $610,240 | | Income From Operations | $78,234 | $692,354 | | Net Income | $11,856 | $1,225,185 | | Net Income Attributable to Common Stockholders | $7,304 | $1,041,073 | | Basic EPS | $0.40 | $55.72 | | Diluted EPS | $0.40 | $55.08 | - For the three months ended September 30, 2024, the company reported a net loss of $13.967 million, a significant decrease from a net income of $608.444 million in the same period of 2023, primarily due to a $30.487 million impairment of oil and natural gas properties and a $13.388 million loss on debt extinguishment in 2024[15] - For the nine months ended September 30, 2024, net income decreased substantially to $11.856 million from $1.225 billion in the prior year, largely driven by a significant decrease in net gain on natural gas, oil and NGL derivatives ($74.487 million in 2024 vs. $514.266 million in 2023) and the impairment charge[17] Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, including common stock, additional paid-in capital, and retained earnings - Total stockholders' equity decreased from $2.162 billion at January 1, 2024, to $2.056 billion at September 30, 2024, primarily due to net losses and common stock repurchases[21] Stockholders' Equity Summary | Metric | January 1, 2024 ($ thousands) | September 30, 2024 ($ thousands) | | :----- | :---------------------------- | :------------------------------- | | Common Stock Amount | $2 | $2 | | Additional Paid-in Capital | $315,726 | $200,196 | | Retained Earnings | $1,847,948 | $1,856,511 | | Total Stockholders' Equity | $2,161,680 | $2,056,240 | - Repurchases of common stock under the Repurchase Program amounted to $29.788 million in Q1 2024, $24.319 million in Q2 2024, and $50.838 million in Q3 2024[21] Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary (Nine Months Ended Sep 30) | Metric | Nine Months Ended Sep 30, 2024 ($ thousands) | Nine Months Ended Sep 30, 2023 ($ thousands) | | :----- | :----------------------------------------- | :----------------------------------------- | | Net cash provided by operating activities | $501,185 | $567,680 | | Net cash used in investing activities | $(379,051) | $(419,981) | | Net cash used in financing activities | $(120,843) | $(146,633) | | Net change in cash and cash equivalents | $1,291 | $1,066 | | Cash and cash equivalents at end of period | $3,220 | $8,325 | - Net cash provided by operating activities decreased by $66.5 million year-over-year, while net cash used in investing activities decreased by $40.9 million, and net cash used in financing activities also decreased by $25.8 million[24] Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements 1. Summary of Significant Accounting Policies This section outlines the key accounting principles and methods used in preparing the financial statements - Gulfport Energy Corporation is an independent natural gas-weighted exploration and production company focused on natural gas, crude oil, and NGL production in key formations[26] - The company is evaluating the impact of new FASB ASUs and SEC climate-related disclosure rules, but does not expect a material impact from the FASB ASUs on its financial statements[29][30][31] Accounts Payable and Accrued Liabilities | Accounts Payable and Accrued Liabilities | September 30, 2024 ($ thousands) | December 31, 2023 ($ thousands) | | :--------------------------------------- | :------------------------------- | :------------------------------ | | Revenue payable and suspense | $120,053 | $148,598 | | Accounts payable | $55,705 | $43,517 | | Accrued capital expenditures | $17,861 | $38,322 | | Accrued transportation, gathering, processing and compression | $40,049 | $32,849 | | Other accrued liabilities | $48,745 | $44,250 | | Total | $282,413 | $309,532 | - Other, net for the three and nine months ended September 30, 2024, includes approximately $3.0 million related to changes in legal reserves for litigation and regulatory proceedings[33] Supplemental Cash Flow Information (Nine Months Ended Sep 30) | Supplemental Cash Flow Information (Nine Months Ended Sep 30) | 2024 ($ thousands) | 2023 ($ thousands) | | :------------------------------------------------------------ | :----------------- | :----------------- | | Interest payments, net of amounts capitalized | $43,980 | $29,073 | | Total changes in operating assets and liabilities, net | $21,247 | $57,538 | | Capitalized stock-based compensation | $4,142 | $3,023 | | Asset retirement obligation capitalized | $681 | $505 | | Release of common stock held in reserve | $1,996 | — | 2. Property and Equipment This section details the company's oil and natural gas properties, including proved and unproved assets, and related impairment charges Property and Equipment Summary | Property and Equipment (in thousands) | September 30, 2024 | December 31, 2023 | | :------------------------------------ | :----------------- | :---------------- | | Proved oil and natural gas properties | $3,276,165 | $2,904,519 | | Unproved properties | $224,370 | $204,233 | | Total property and equipment, net | $2,374,385 | $2,252,299 | - The Company recorded a non-cash ceiling test impairment of $30.5 million for the three months ended September 30, 2024, due to declines in the 12-month average trailing price for natural gas, with no impairment recorded in 2023[37][180][198] - Capitalized general and administrative costs were approximately $18.5 million for the nine months ended September 30, 2024, up from $16.2 million in the prior year[41] Asset Retirement Obligation | Asset Retirement Obligation (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Beginning of period | $29,941 | $33,171 | | Liabilities incurred | $681 | $505 | | Accretion expense | $1,705 | $2,117 | | End of period | $32,327 | $34,270 | 3. Long-Term Debt This section describes the company's long-term debt obligations, including senior unsecured notes and credit facility arrangements Long-Term Debt Summary | Long-Term Debt (in thousands) | September 30, 2024 | December 31, 2023 | | :---------------------------- | :----------------- | :---------------- | | 6.750% senior unsecured notes due 2029 | $650,000 | $— | | 8.0% senior unsecured notes due 2026 | $25,702 | $550,000 | | Credit Facility due 2028 | $30,000 | $118,000 | | Total debt, net | $694,389 | $667,382 | - In September 2024, Gulfport Operating issued $650.0 million of 6.750% senior notes due 2029 and used the proceeds to purchase and retire $524.3 million of the 2026 Senior Notes, extending the maturity of substantially all senior notes from 2026 to 2029[45][46][50][158] - The retirement of the 2026 Senior Notes resulted in a $13.4 million loss on debt extinguishment, including $12.9 million in cash costs[50][183][202] - The Credit Facility was amended in September 2024, increasing elected commitments to $1.0 billion, reaffirming the borrowing base at $1.1 billion, extending maturity to September 12, 2028, and reducing the pricing grid by 50 bps[54][159][215] - As of September 30, 2024, the Company had $30.0 million outstanding borrowings under the Credit Facility and was in compliance with all covenants[59] 4. Mezzanine Equity This section details the company's preferred stock, its dividend features, conversion options, and classification as mezzanine equity - The Company's preferred stock entitles holders to cumulative quarterly dividends at 10% per annum for cash dividends and 15% for PIK Dividends, with the option to convert to common stock[63][64] - The preferred stock is classified as mezzanine equity due to its redemption features[67] Preferred Stock Activity | Preferred Stock Activity (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Preferred stock, beginning of period | 44,214 | 52,295 | | Conversion of preferred stock | (469) | (6,966) | | Preferred stock, end of period | 43,745 | 45,329 | - Cash dividends paid on preferred stock were $3.3 million for the nine months ended September 30, 2024, compared to $3.7 million in the prior year[67][218][231] 5. Equity This section covers common stock activity, including share issuances and the company's repurchase program - In January 2024, the remaining 62,000 shares in the Disputed Claims Reserve were issued to claimants, with no remaining shares in the reserve[70] - The Board of Directors approved an increase to the authorized Repurchase Program from $650 million to $1 billion and extended the authorization through December 31, 2025, effective November 4, 2024[153] Repurchase Program Activity | Repurchase Program Activity (in thousands) | Shares Purchased | Dollar Value of Shares Purchased | Average Price Paid Per Share | | :--------------------------------------- | :--------------- | :------------------------------- | :--------------------------- | | First quarter 2024 | 210 | $29,492 | $140.39 | | Second quarter 2024 | 161 | $25,000 | $155.65 | | Third quarter 2024 | 341 | $49,862 | $146.17 | | Total (Nine Months Ended Sep 30, 2024) | 712 | $104,354 | $146.60 | - As of September 30, 2024, the Company repurchased 5.1 million shares for $504.0 million at a weighted average price of $99.25 per share since the inception of the Repurchase Program[74][160] 6. Stock-Based Compensation This section details the expense and unrecognized compensation related to the company's stock-based incentive plans - Stock-based compensation expense for the nine months ended September 30, 2024, was $12.6 million, with $4.1 million capitalized, compared to $9.2 million and $3.0 million capitalized in the prior year[77] - As of September 30, 2024, unrecognized compensation expense for restricted stock units was $14.3 million (expected to be recognized over 1.88 years) and for performance vesting restricted shares was $9.4 million (expected over 1.94 years)[82][85] Unvested Shares Activity (Nine Months Ended Sep 30, 2024) | Unvested Shares Activity (Nine Months Ended Sep 30, 2024) | Performance Vesting Restricted Stock Units | Restricted Stock Units | | :-------------------------------------------------------- | :----------------------------------------- | :--------------------- | | Unvested shares as of January 1, 2024 | 193,602 | 255,578 | | Granted | 69,436 | 58,346 | | Vested | (96,746) | (265,797) | | Forfeited/canceled | (5,132) | — | | Unvested shares as of September 30, 2024 | 167,210 | 178,139 | 7. Restructuring Costs This section outlines personnel-related restructuring expenses incurred due to organizational changes - During the nine months ended September 30, 2023, Gulfport recognized $4.8 million in personnel-related restructuring expenses, including $1.3 million in non-cash charges from accelerated vesting of share-based grants, due to changes in organizational structure and leadership[86][200] 8. Earnings (Loss) Per Share This section provides a reconciliation of net income to basic and diluted earnings per share EPS Reconciliation (Three Months Ended Sep 30) | EPS Reconciliation (Three Months Ended Sep 30) | 2024 ($ thousands) | 2023 ($ thousands) | | :--------------------------------------------- | :----------------- | :----------------- | | Net (loss) income | $(13,967) | $608,444 | | Dividends on preferred stock | $(1,093) | $(1,133) | | Net (loss) income attributable to common stockholders | $(15,060) | $517,555 | | Basic EPS | $(0.83) | $27.72 | | Diluted EPS | $(0.83) | $27.37 | | Weighted average common shares outstanding—Basic | 18,062 | 18,670 | | Weighted average common shares outstanding—Diluted | 18,062 | 18,954 | EPS Reconciliation (Nine Months Ended Sep 30) | EPS Reconciliation (Nine Months Ended Sep 30) | 2024 ($ thousands) | 2023 ($ thousands) | | :-------------------------------------------- | :----------------- | :----------------- | | Net income | $11,856 | $1,225,185 | | Dividends on preferred stock | $(3,293) | $(3,718) | | Net income attributable to common stockholders | $7,304 | $1,041,073 | | Basic EPS | $0.40 | $55.72 | | Diluted EPS | $0.40 | $55.08 | | Weighted average common shares outstanding—Basic | 18,133 | 18,686 | | Weighted average common shares outstanding—Diluted | 18,463 | 18,937 | - For the three months ended September 30, 2024, 0.2 million share-based awards were anti-dilutive, while for the nine months ended September 30, 2024, 0.3 million share-based awards were dilutive[88] 9. Commitments and Contingencies This section details the company's contractual obligations, firm sales commitments, and ongoing legal and regulatory matters Firm Transportation and Gathering Commitments | Firm Transportation and Gathering Commitments (in thousands) | Total | | :------------------------------------------------------- | :---- | | Remaining 2024 | $55,240 | | 2025 | $139,740 | | 2026 | $134,257 | | 2027 | $136,425 | | 2028 | $136,581 | | Thereafter | $600,031 | | Total | $1,202,274 | Future Firm Sales Commitments | Future Firm Sales Commitments (MMBtu per day) | Total | | :-------------------------------------------- | :---- | | Remaining 2024 | 20,000 | | 2025 | 68,000 | | 2026 | 75,000 | | 2027 | 12,000 | | Thereafter | — | | Total | 175,000 | - The Company has approximately $5.5 million in remaining contractual commitments to purchase inventory and other materials for 2024[96] - The Company is involved in litigation regarding alleged trespass and illegal production beyond Utica/Marcellus shale formations, with claims accruing after May 17, 2021, still being pursued[99] - Gulfport received a NOV/FOV from USEPA related to alleged untimely repairs under a Consent Decree, with resolution potentially resulting in monetary sanctions exceeding $300,000, and a $97,500 penalty was paid to USDOJ for stipulated penalties[100] 10. Derivative Instruments This section describes the company's use of derivative instruments to manage commodity price risk and their fair value - The Company uses various derivative instruments to mitigate risks from volatile natural gas, oil, and NGL prices, typically hedging 30% to 70% of forecasted current year production for the next 12 to 36 months[106][107] Open Fixed Price Swap Positions (as of Sep 30, 2024) | Open Fixed Price Swap Positions (as of Sep 30, 2024) | Daily Volume (MMBtu/d or Bbl/d) | Weighted Average Price ($/MMBtu or $/Bbl) | | :--------------------------------------------------- | :------------------------------ | :---------------------------------------- | | Natural Gas (Remaining 2024) | 400,000 | $3.77 | | Natural Gas (2025) | 250,000 | $3.82 | | Oil (Remaining 2024) | 500 | $77.50 | | Oil (2025) | 2,000 | $74.50 | | NGL (Remaining 2024) | 2,500 | $30.25 | | NGL (2025) | 2,000 | $30.09 | Derivative Instruments Fair Value | Derivative Instruments Fair Value (in thousands) | September 30, 2024 | December 31, 2023 | | :--------------------------------------------- | :----------------- | :---------------- | | Short-term derivative asset | $111,076 | $233,226 | | Long-term derivative asset | $23,073 | $47,566 | | Short-term derivative liability | $(36,758) | $(21,963) | | Long-term derivative liability | $(23,618) | $(18,602) | | Total commodity derivative position | $73,773 | $240,227 | Total Gains on Natural Gas, Oil and NGL Derivatives (Three Months Ended Sep 30) | Total Gains on Natural Gas, Oil and NGL Derivatives (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :----------------------------------------------------------------- | :------------------------------ | :------------------------------ | | Natural gas derivatives | $27,775 | $53,056 | | Oil and condensate derivatives | $6,791 | $(10,544) | | NGL derivatives | $3,400 | $(3,095) | | Total | $37,966 | $39,417 | Total Gains on Natural Gas, Oil and NGL Derivatives (Nine Months Ended Sep 30) | Total Gains on Natural Gas, Oil and NGL Derivatives (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------------------------------------- | :----------------------------- | :----------------------------- | | Natural gas derivatives | $74,129 | $514,267 | | Oil and condensate derivatives | $4,666 | $(3,628) | | NGL derivatives | $(4,308) | $3,627 | | Total | $74,487 | $514,266 | 11. Fair Value Measurements This section outlines the fair value hierarchy and valuation techniques used for financial instruments Fair Value Measurements (September 30, 2024, in thousands) | Fair Value Measurements (September 30, 2024, in thousands) | Level 1 | Level 2 | Level 3 | | :------------------------------------------------------- | :------ | :------ | :------ | | Assets: Derivative instruments | $— | $134,149 | $— | | Assets: Contingent consideration arrangement | $— | $— | $2,700 | | Liabilities: Derivative instruments | $— | $60,376 | $— | - The fair value of derivative instruments is estimated using industry-standard models with observable inputs (Level 2)[129] - The contingent consideration arrangement from the SCOOP water infrastructure sale is valued at $2.7 million (Level 3) using discounted cash flow techniques based on unobservable inputs[130] 12. Revenue from Contracts with Customers This section describes the company's revenue recognition policies for natural gas, oil, condensate, and NGL sales - Revenues are primarily from natural gas, oil, condensate, and NGL sales, recognized upon transfer of control to the customer, with variable consideration tied to market indices[133] - Receivables from contracts with customers were $88.9 million as of September 30, 2024, down from $122.5 million at December 31, 2023[136] 13. Leases This section outlines the company's operating lease arrangements for equipment and office space - The Company has operating leases for equipment and office space, including one active long-term drilling rig contract, with a weighted-average remaining lease term of 0.81 years and a weighted-average discount rate of 6.56% as of September 30, 2024[138][139][140][144] Total Lease Cost (Three Months Ended Sep 30) | Total Lease Cost (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :------------------------------ | :------------------------------ | :------------------------------ | | Operating lease cost | $3,403 | $3,443 | | Short-term lease cost | $4,834 | $5,112 | | Total lease cost | $8,237 | $8,555 | Total Lease Cost (Nine Months Ended Sep 30) | Total Lease Cost (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease cost | $10,209 | $10,329 | | Short-term lease cost | $20,783 | $22,410 | | Total lease cost | $30,992 | $32,739 | 14. Income Taxes This section discusses the company's effective income tax rate and valuation allowance for deferred tax assets - The Company's effective income tax rate was 22.5% for the nine months ended September 30, 2024, significantly higher than (82.8)% for the same period in 2023, primarily due to the release of a valuation allowance in Q3 2023[146] - A valuation allowance of $85.8 million is associated with federal and state deferred tax assets, as the Company believes a portion will be utilized[147] 15. Related Party Transactions This section discloses common stock repurchases from a related party under the company's repurchase program - The Company repurchased common stock from Silver Point Capital, L.P. as part of its Repurchase Program: $15.0 million (97,219 shares) on March 19, 2024, and $24.9 million (170,000 shares) on September 19, 2024[148][149] 16. Subsequent Events This section reports significant events occurring after the reporting period, including new derivative contracts and updates to the repurchase program Natural Gas Basis Swaps Entered (Subsequent to Sep 30, 2024, as of Oct 28, 2024) | Period | Index | Daily Volume (MMBtu/d) | Weighted Average Price ($/MMBtu) | | :----- | :---- | :--------------------- | :------------------------------- | | 2025 | Rex Zone 3 | 20,000 | $(0.18) | | 2025 | TGP 500 | 10,000 | $0.31 | | 2026 | Rex Zone 3 | 40,000 | $(0.19) | | 2026 | TGP 500 | 10,000 | $0.54 | - On November 4, 2024, the Board of Directors approved an increase to the authorized Repurchase Program from $650 million to $1 billion and extended the authorization through December 31, 2025[153] Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations This section provides management's analysis of Gulfport's financial condition, results of operations, and liquidity for Q3 2024 and 2023 Introduction This section introduces management's narrative on the company's financial condition, operations, and liquidity - The MD&A provides management's narrative on financial condition, results of operations, liquidity, and other factors affecting operating results, to be read with the financial statements and notes[155] Overview This section provides a high-level description of Gulfport's business as an independent natural gas-weighted exploration and production company - Gulfport is an independent natural gas-weighted exploration and production company with assets in the Appalachia and Anadarko basins[157] - The company's strategy is to develop assets safely and responsibly, generate sustainable cash flow, improve margins and operating efficiencies, and return capital to shareholders[157] Recent Developments This section highlights key corporate actions and financial events that occurred recently - In September 2024, Gulfport extended the maturity of substantially all senior notes from 2026 to 2029 by issuing 2029 Senior Notes and retiring 2026 Senior Notes[158] - The Credit Facility maturity was extended to September 12, 2028, with elected commitments increased to $1.0 billion and the pricing grid reduced by 50 bps[159] - During Q3 2024, the Company repurchased 341,132 shares for $49.9 million at a weighted average price of $146.17 per share[160] 2024 Operational and Financial Highlights This section summarizes key operational and financial achievements for the third quarter of 2024 - Total net production: 1,057.2 MMcfe per day[162] - Turned to sales: 10 gross (9.0 net) operated wells[162] - Operating cash flows: $189.7 million[162] - Shares repurchased: 341,132 for $49.9 million[162] - Total liquidity: $909.4 million[162] 2024 Production and Drilling Activity This section presents the company's production volumes and drilling activities for 2024 compared to 2023 Production Volumes (Three Months Ended Sep 30) | Production Volumes (Three Months Ended Sep 30) | 2024 | 2023 | | :--------------------------------------------- | :--- | :--- | | Natural gas (Mcf/day) | 966,522 | 971,352 | | Oil and condensate (Bbl/day) | 4,618 | 3,195 | | NGL (Bbl/day) | 10,489 | 11,061 | | Combined (Mcfe/day) | 1,057,164 | 1,056,887 | Production Volumes (Nine Months Ended Sep 30) | Production Volumes (Nine Months Ended Sep 30) | 2024 | 2023 | | :-------------------------------------------- | :--- | :--- | | Natural gas (Mcf/day) | 970,842 | 953,989 | | Oil and condensate (Bbl/day) | 3,569 | 3,813 | | NGL (Bbl/day) | 10,239 | 12,387 | | Combined (Mcfe/day) | 1,053,687 | 1,051,188 | - Total net production remained consistent year-over-year for both the three and nine months ended September 30, 2024, largely due to 2023 and 2024 development programs[163][165] - In Q3 2024, three gross (3.0 net) Utica wells were spud, and seven gross (6.6 net) Utica wells commenced sales, while three gross (2.4 net) SCOOP wells commenced sales[166] RESULTS OF OPERATIONS This section provides a detailed comparison of the company's financial results for the reported periods Comparison of the Three Month Periods Ended September 30, 2024 and 2023 This section compares the company's financial performance for the three months ended September 30, 2024, and 2023 Sales (Three Months Ended Sep 30) | Sales (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | % Change | | :------------------- | :------------------------------ | :------------------------------ | :------- | | Natural gas sales | $159,862 | $177,401 | (10)% | | Oil and condensate sales | $29,467 | $22,896 | 29% | | NGL sales | $26,617 | $26,953 | (1)% | | Total sales | $215,946 | $227,250 | (5)% | - Natural gas sales decreased by 10% due to a 10% decrease in realized prices, driven by a lower average Henry Hub gas index ($2.16/Mcf in 2024 vs. $2.55/Mcf in 2023)[172] - Oil and condensate sales increased by 29% due to a 45% increase in sales volumes from new Utica liquids window wells, partially offset by an 11% decrease in realized prices[173] Production Costs per Mcfe (Three Months Ended Sep 30) | Production Costs per Mcfe (Three Months Ended Sep 30) | 2024 ($/Mcfe) | 2023 ($/Mcfe) | | :---------------------------------------------------- | :------------ | :------------ | | Average lease operating expenses | $0.19 | $0.16 | | Average taxes other than income | $0.07 | $0.07 | | Average transportation, gathering, processing and compression | $0.92 | $0.89 | | Total | $1.18 | $1.12 | - Lease operating expenses increased by 17% due to increased water disposal in Utica/Marcellus and repairs/maintenance in SCOOP[176] - Interest expense increased by 6% to $15.866 million, driven by interest on new 2029 Senior Notes and higher Credit Facility balance, partially offset by decreased interest on 2026 Senior Notes[182] - A non-cash ceiling test impairment of $30.5 million was recorded for oil and natural gas properties in Q3 2024 due to declining natural gas prices[180] Comparison of the Nine Month Periods Ended September 30, 2024 and 2023 This section compares the company's financial performance for the nine months ended September 30, 2024, and 2023 Sales (Nine Months Ended Sep 30) | Sales (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | % Change | | :------------------- | :----------------------------- | :----------------------------- | :------- | | Natural gas sales | $492,606 | $619,181 | (20)% | | Oil and condensate sales | $70,295 | $76,212 | (8)% | | NGL sales | $80,870 | $92,935 | (13)% | | Total sales | $643,771 | $788,328 | (18)% | - Natural gas sales decreased by 20% due to a 22% decrease in realized prices, despite a 2% increase in sales volumes[190] - Oil and condensate sales decreased by 8% due to a 6% decrease in sales volumes and a 2% decrease in realized prices[191] Production Costs per Mcfe (Nine Months Ended Sep 30) | Production Costs per Mcfe (Nine Months Ended Sep 30) | 2024 ($/Mcfe) | 2023 ($/Mcfe) | | :--------------------------------------------------- | :------------ | :------------ | | Average lease operating expenses | $0.18 | $0.18 | | Average taxes other than income | $0.08 | $0.09 | | Average transportation, gathering, processing and compression | $0.91 | $0.91 | | Total | $1.16 | $1.18 | - Lease operating expenses decreased by 2% due to reduced water disposal, surface rental, and labor expenses in SCOOP operations and non-operated expenses in Utica/Marcellus[194] - Interest expense increased by 9% to $46.027 million, driven by interest on 2029 Senior Notes and higher Credit Facility balance, partially offset by decreased interest on 2026 Senior Notes[201] - Other, net for the nine months ended September 30, 2024, included $3.0 million related to legal reserves, a significant change from 2023 which included a $17.8 million interim distribution for a TC claim and a $5.0 million recoupment of collateral[203][204] Liquidity and Capital Resources This section discusses the company's ability to generate and manage cash, fund operations, and meet financial obligations - Gulfport aims to maintain sufficient liquidity through operating cash flows, cash on hand, and Credit Facility borrowings to fund operations, capital expenditures, and share repurchases, utilizing derivatives to mitigate commodity price volatility[207][209] - As of September 30, 2024, the Company had $3.2 million in cash, $30.0 million in Credit Facility borrowings, $63.8 million in letters of credit, $25.7 million in 2026 Senior Notes, and $650.0 million in 2029 Senior Notes, totaling $705.7 million in funded debt[211] Sources and Uses of Cash (Nine Months Ended Sep 30, in thousands) | Sources and Uses of Cash (Nine Months Ended Sep 30, in thousands) | 2024 | 2023 | | :--------------------------------------------------------------- | :--- | :--- | | Net cash provided by operating activities | $501,185 | $567,680 | | Additions to oil and natural gas properties | $(376,910) | $(421,132) | | Debt activity, net | $24,761 | $(50,000) | | Repurchases of common stock | $(103,885) | $(82,757) | | Dividends on preferred stock | $(3,293) | $(3,718) | | Shares exchanged for tax withholdings | $(23,606) | $(3,191) | | Net change in cash and cash equivalents | $1,291 | $1,066 | - Capital expenditures for the nine months ended September 30, 2024, totaled $367.8 million, including $277.4 million for drilling and completion, $51.6 million for maintenance leasehold, and $38.8 million for discretionary acreage acquisitions[222] - Off-balance sheet arrangements include $63.8 million in letters of credit and $43.8 million in surety bonds outstanding, primarily for firm transportation agreements, and $5.5 million in remaining inventory purchase commitments for 2024[235] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details Gulfport's exposure to market risks, primarily commodity price and interest rate risks, and mitigation strategies - Gulfport uses derivative instruments to mitigate exposure to volatile natural gas, oil, and NGL prices, aiming to protect short-term cash flow and achieve risk management objectives[239][241][245] - As of September 30, 2024, the Company had a net asset derivative position of $73.8 million, where a 10% increase in underlying commodity prices would decrease this asset by approximately $86.2 million, while a 10% decrease would increase it by $85.9 million[247] - The Credit Facility is structured under floating rate terms, making interest expense sensitive to fluctuations in prime rates or term benchmark rates, with $30.0 million outstanding at a weighted average rate of 8.37% for the nine months ended September 30, 2024[248] Item 4. Controls and Procedures This section confirms the effectiveness of Gulfport's disclosure controls and procedures and reports no material changes - As of September 30, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective[250] - No material changes in internal control over financial reporting occurred during the last fiscal quarter[251] PART II OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal, risk, and equity matters Item 1. Legal Proceedings This section refers to Note 9 of the consolidated financial statements for detailed information regarding the Company's legal proceedings and contingencies - Information on legal proceedings is set forth in Note 9 of the consolidated financial statements[253] Item 1A. Risk Factors This section highlights that the Company's business is subject to various risks, which are detailed in Item 1A of its Annual Report on Form 10-K for the year ended December 31, 2023 - Risk factors that could materially adversely affect the business are described in Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2023[254] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities and details the common stock repurchase activity for the three months ended September 30, 2024, under the publicly announced repurchase program - No unregistered sales of equity securities occurred[254] Common Stock Repurchase Activity (Three Months Ended Sep 30, 2024) | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as part of publicly announced plans or programs | Approximate maximum dollar value of shares that may yet be purchased under plans or programs | | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------------------------- | | 59,898 | $154.32 | 50,995 | $188,021,000 | | 66,541 | $140.92 | 62,730 | $179,184,000 | | 227,903 | $145.95 | 227,407 | $145,996,000 | | 354,342 | $146.42 | 341,132 | | Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[256] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Mine Safety Disclosures are not applicable[256] Item 5. Other Information This section reports that no officers or directors adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2024 - No officers or directors adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2024[257] Item 6. Exhibits This section provides a comprehensive list of exhibits filed with the Form 10-Q, including organizational documents, debt indentures, credit agreements, certifications, and XBRL-related documents - The exhibits include the Amended Joint Chapter 11 Plan of Reorganization, Amended and Restated Certificate of Incorporation and Bylaws, Indenture for 2029 Senior Notes, and the Fourth Amendment to Credit Agreement[258] - Certifications from the CEO and CFO pursuant to Rule 13a-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code are included[258] - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Labels Linkbase, and Presentation Linkbase Documents are filed[258][260] Signatures This section contains the signature of the registrant, Gulfport Energy Corporation, by its Chief Financial Officer, Michael Hodges, confirming the filing of the report - The report is signed by Michael Hodges, Chief Financial Officer of Gulfport Energy Corporation, on November 6, 2024[262]