Gulfport Energy(US:GPOR)2020-05-08 18:47Financial Data and Key Metrics Changes - For Q1 2020, Gulfport reported approximately $16.6 million of adjusted net income and generated $128.3 million of adjusted EBITDA [16] - Operating cash flow before changes in working capital totaled $86.7 million, with a capital outspend of roughly $50 million for the quarter [16][21] - The company improved its balance sheet by reducing total long-term debt by approximately $79.6 million as of March 31, 2020, compared to year-end 2019 [21] Business Line Data and Key Metrics Changes - Average daily production for Q1 2020 was 1.05 billion cubic feet of gas equivalent per day, composed of 90% gas, 7% natural gas liquids, and 3% oil [34] - In the Utica, the company spud seven gross wells and achieved an average spud to rig release of 17.7 days, down 10.6% from 2019 [24] - In the SCOOP, the average spud to rig release was 37.4 days, a decrease of 32% compared to the 2019 program average [26] Market Data and Key Metrics Changes - The COVID-19 pandemic has caused severe demand declines for fossil fuels, leading to oil prices at 20-year lows and an expected decline in associated gas production [13] - Natural gas prices are expected to remain range-bound between $2.60 to $2.90 per MMBtu, with a potential tightening of the gas supply-demand balance as U.S. gas production declines [15] - Realized natural gas price before hedges was approximately $0.59 per Mcfe, below NYMEX prices, which was better than the guidance range of $0.70 to $0.80 per Mcf [34] Company Strategy and Development Direction - Gulfport remains committed to maximizing cash flow generation, reducing costs, and ensuring strong liquidity through 2020 [16] - The company plans to shut-in a portion of its operated production due to low prices, forecasting an impact of less than 20 million cubic feet of gas equivalent per day [18] - The management team is focused on increasing scale and efficiencies to maximize returns, aiming to transform Gulfport into a sizable natural gas-weighted producer [55] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the short-term and long-term impacts of COVID-19 on domestic gas demand, while remaining optimistic about a potential gas price rally [14] - The company is exploring opportunities to reshape production to align with better pricing, indicating that production guidance for 2020 should no longer be relied upon [19] - The management team emphasized the importance of maintaining a strong strategic hedging program to support long-term economic development [40] Other Important Information - Gulfport has a tax benefits preservation plan in place to protect its federal net operating losses (NOLs) from being limited due to ownership changes [51][52] - The company has retired approximately $73 million of senior notes for $23 million in cash spend, reducing its net debt by $50 million [49] Q&A Session Summary Question: Thoughts on hedges for 2021 - Management aims to build a strong hedge position as close to $3 as possible, with a focus on adding collars and swaps [57][59] Question: Production cadence for 2020 - The plan is to have higher production in the second half of the year, moving peak production from Q2 to Q3 and Q4 [77][78] Question: Impact of non-op shut-ins - The majority of production is operated, making non-op components relatively small and not significantly impactful [71][73] Question: Duration of potential shut-ins in Utica - The production curtailed is about 20 million cubic feet equivalent, with plans to bring wells back online as oil prices improve [81] Question: Plans for the rig in SCOOP - The rig is planned to remain active throughout the year, with all completion work in SCOOP already finished [84] Question: Capital allocation towards revolver versus bond repurchases - Management is focused on generating free cash flow and will evaluate the best allocation towards debt repayment and bond repurchases [92][94] Question: Market dynamics in Appalachia - Management believes that gas prices will stabilize around $2.60 to $2.90, with potential for increased activity as prices rise [99]