Gulfport Energy(US:GPOR)2020-02-28 21:10Financial Data and Key Metrics Changes - For the full year 2019, Gulfport reported adjusted net income of $118.6 million and adjusted EBITDA of $814.4 million [8] - Operating cash flow before changes in working capital totaled $640.3 million, with free cash flow of $37.8 million in 2019 [8] - Capital expenditures for 2019 were $574 million, aligning with guidance and approximately 25% lower than 2018 [9] Business Line Data and Key Metrics Changes - Total production was roughly flat in 2019 compared to 2018, consistent with guidance [10] - Per unit operating expense in Q4 2019 was $0.77 per Mcfe, a 13% decrease from Q4 2018 [11] - The 2020 budget includes $265 million to $285 million for drilling and completion activities, with expected average daily production of 1.1 to 1.15 billion cubic feet equivalent per day [35] Market Data and Key Metrics Changes - Natural gas prices entered 2020 at the lowest level seen in 20 years due to supply growth and unseasonably warm winter [24] - The company expects realized natural gas prices to range from $0.70 to $0.80 per Mcfe below NYMEX prices in 2020 [36] - Forecasted differentials for natural gas liquids are 30% to 35% of WTI, with a $4.50 to $5 discount to WTI for oil [38] Company Strategy and Development Direction - The company aims to simplify its portfolio and has completed several non-core asset sales generating over $95 million [12] - Gulfport plans to invest approximately $300 million across core assets in 2020, a 50% reduction from 2019 [28] - The operational plan prioritizes free cash flow generation and maintaining a strong liquidity position [27] Management's Comments on Operating Environment and Future Outlook - Management believes low gas prices are not sustainable and anticipates a decline in U.S. supply in 2020, leading to potential price recovery [25] - The company is focused on capital discipline and cash flow generation, with a conservative approach to budgeting for 2020 [58] - Management expects better gas prices in 2021 based on supply and demand dynamics [54] Other Important Information - Gulfport's year-end 2019 proved reserves totaled approximately 4.5 Tcfe, comprised of 89% natural gas and 11% liquids [13] - The company has made significant structural and personnel changes to improve organizational efficiency [14][16] - A material weakness in internal controls was identified, leading to a restatement of the third quarter 2019 Form 10-Q [49] Q&A Session Summary Question: Capital allocation and free cash flow generation - Management emphasized the importance of liquidity and balance sheet strength, with all options on the table for capital allocation [57] Question: Future cost reduction opportunities - Management is focused on cost-cutting measures and exploring opportunities with midstream providers [67] Question: Well cost assumptions for 2020 guidance - Targeted drilling and completion costs for Utica are $770 to $870 per lateral foot, and for SCOOP, $1,200 to $1,300 per lateral foot [69] Question: Impact of firm transport commitments - Most shortfalls are expected in the SCOOP, with opportunities for acquisitions to improve leverage and meet commitments [78] Question: Expectations for revolver and redetermination season - Management anticipates minimal reliance on the revolver, with a focus on maintaining liquidity during the downturn [90]