Gulfport Energy(US:GPOR)2024-08-07 16:30Financial Data and Key Metrics Changes - The company generated $164 million of adjusted EBITDA and $20 million of adjusted free cash flow in Q2 2024, with average daily production totaling 1.05 billion cubic feet equivalent per day [5][16] - Net cash provided by operating activities before changes in working capital totaled approximately $149 million during the second quarter, exceeding capital expenditures for the quarter [16] - The all-in realized price during Q2 was $2.93 per Mcfe, which is $1.04 or 55% above the NYMEX Henry Hub Index price [17] Business Line Data and Key Metrics Changes - The company completed drilling on five gross wells, with three in Ohio targeting the Utica formation and two in the SCOOP targeting the Woodford [6] - The company achieved a new record for daily frac pumping hours in the Utica, improving the quarterly average to 21.9 hours per day, a 28% increase over 2023 [6][7] - The company completed frac operations on four gross condensate drills in Harrison County, Ohio, marking a shift towards more liquids-rich activity [9][10] Market Data and Key Metrics Changes - The natural gas price differential before hedges was negative $0.26 per Mcf compared to the average daily NYMEX settled price during the quarter [18] - Approximately 10% to 15% of natural gas has firm delivery to the Gulf Coast, providing direct exposure to the growing LNG corridor [18] Company Strategy and Development Direction - The company is focused on lowering operating and capital costs, maximizing free cash flow generation, and returning capital to shareholders [4] - The strategy includes a shift towards more liquids-rich directed activity, with plans to begin drilling a four-well Marcellus development in early 2025 [12][14] - The company plans to allocate substantially all full-year 2024 adjusted free cash flow towards common stock repurchases, excluding discretionary acreage acquisitions [15][24] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's operational improvements and ability to generate positive free cash flow despite low commodity prices [16][25] - The company anticipates an improving commodity price environment in the second half of 2024, which should accelerate adjusted free cash flow [16] - Management highlighted the importance of monitoring the macro environment and commodity prices before allocating the $25 million in potential savings [27][28] Other Important Information - The company has invested roughly $34 million on maintenance, leasehold, and land investment through June 30, 2024, reaffirming a budget of $50 million to $60 million for 2024 [13] - The company repurchased nearly 161,000 shares of common stock for approximately $25 million during Q2 2024 [22][23] Q&A Session Summary Question: On the $25 million of potential savings, what needs to be seen in the markets to trigger additional E&P activity? - Management indicated that the allocation would depend on the general macro environment and oil pricing, with a focus on oil and condensate areas [27][28] Question: How do acreage acquisitions compete with buybacks for free cash flow? - Management stated that both opportunities are consistently rated at the top of the portfolio, and they aim to identify high-margin opportunities for capital allocation [29][30] Question: How do you see the liquids SKU evolving through 2025? - Management expects a reduction in the oil percentage in the commodity stream, moving from 92% gas to the high 80s over the next year and a half [34][35] Question: Are you seeing any basis impact from the Mountain Valley pipeline? - Management noted that there has not been a material change in basis markets, as the market had largely anticipated the pipeline's impact [36] Question: Is the $25 million in savings something that has been accruing through the year? - Management clarified that there has been no accrual to date, but potential allocation towards accelerated activity could benefit 2025 [38][39] Question: Does the stock price factor into the decision on how to allocate the $25 million in savings? - Management confirmed that stock price and macro environment are factors in the decision-making process for capital allocation [45][46] Question: How do the discretionary acreage acquisitions compare to current inventory? - Management indicated that the new acquisitions target high-margin areas and are expected to be developed within 12 to 15 months [48][49]