Gulfport Energy(US:GPOR)2021-08-06 16:58Financial Data and Key Metrics Changes - The company reported a net income of $33 million and generated $157 million of adjusted EBITDA for the second quarter [39] - Free cash flow for the same period was $74 million, defined as adjusted EBITDA minus capital expenditures, interest expense, and capitalized G&A [40] - Total assets at the end of the second quarter were approximately $2.1 billion, with total shareholders' equity around $453 million [42] Business Line Data and Key Metrics Changes - Production averaged 989 million cubic feet of gas equivalent per day during the second quarter, with expectations of a slight drop in production in the third quarter [13] - The Utica program produced 744 million cubic feet equivalent per day during the quarter, outperforming historical averages [16] - The 2021 SCOOP program is expected to yield rates of return of approximately 80% at $2.75 gas and $60 oil [18] Market Data and Key Metrics Changes - Midstream volume commitments have been reduced to 900,000 decatherm per day gross capacity, providing diversified takeaway capacity [21] - The company has entered into commodity derivative contracts totaling approximately 800 million cubic feet per day with an average floor price of $2.64 per Mcf for the remaining six months of 2021 [41] Company Strategy and Development Direction - The company has adopted a new business model focused on free cash flow generation and returns over production growth [9] - A maintenance-level capital spend of approximately $300 million per year is targeted, expected to result in roughly 1 Bcf equivalent per day of production [15] - The company aims to reduce outstanding debt using excess cash flow before returning capital to shareholders [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate significant free cash flow going forward, which is currently underappreciated [33] - The company is focused on continuous improvement and cost-effective production, supported by a strong balance sheet [30] - Management indicated that while they are focused on paying down debt, they are also studying options for future capital allocation based on market conditions [59][75] Other Important Information - The company has made significant progress in reducing greenhouse gas and methane emissions, with a renewed focus on sustainability [11][12] - Fresh start accounting was adopted upon emergence from bankruptcy, resulting in a new entity for financial reporting purposes [35] Q&A Session Summary Question: Potential non-core sales and inventory assessment - Management is currently assessing the standalone case for the business and does not see any non-core assets at this time [50][52] Question: Capital allocation focus between Utica and SCOOP - The company is targeting dry gas in the Utica while also taking advantage of liquid production opportunities in the SCOOP [53][54] Question: Utica production decline and midstream issues - Management explained that the production decline was due to a small development program and the timing of new wells coming online [64][68] Question: Remaining inventory in SCOOP and drilling focus - The company plans to focus on liquid-rich locations in the condensate window in the near term while maintaining a steady activity level [71][72] Question: Long-term growth and capital allocation strategy - Management emphasized the importance of steady operations and efficient capital spending, with a focus on paying down debt before considering growth investments [75]