Gulfport Energy(US:GPOR)2024-02-28 19:45Financial Data and Key Metrics Changes - The company reported net cash provided by operating activities before changes in working capital totaling approximately $184 million during Q4 2023, more than doubling capital expenditures and allowing for significant common share repurchases [13] - Adjusted EBITDA for the quarter was $191 million, with adjusted free cash flow of $85 million driven by a strong hedge position and low operating costs [13] - The all-in realized price during Q4 was $3.20 per million cubic feet equivalent (Mcfe), which is $0.33 above the NYMEX Henry Hub Index price, highlighting the benefits of the company's diverse marketing portfolio [55] Business Line Data and Key Metrics Changes - The company drilled and turned to sales 24 gross wells in 2023, including 20 in the Utica, 2 in the Marcellus, and 2 in the SCOOP, achieving over a 60% year-over-year improvement in total footage drilled per day [6][24] - Production for the year averaged 1,054 million cubic feet equivalent per day, roughly 3% above the high-end of initial guidance [5] - The company anticipates production levels in 2024 to be between 1.045 billion to 1.08 billion cubic feet equivalent per day, remaining relatively flat compared to 2023 [11] Market Data and Key Metrics Changes - The natural gas price differential before hedges was negative $0.51 per Mcf compared to the average monthly NYMEX settled price during Q4, slightly tighter than Q3 2023 [55] - The company has locked in over 40% of its 2024 natural gas basis exposure, providing pricing security at major sales points [56] Company Strategy and Development Direction - The company plans to focus on optimizing margins, development program cycle times, and operating costs, projecting total capital spending for 2024 to be in the range of $380 million to $420 million [30] - The company is prioritizing the development of recently acquired Utica acreage, with plans to begin pad construction in late 2024 and commence drilling in early 2025 [29] - The company aims to allocate substantially all of its adjusted free cash flow towards common share repurchases, excluding acquisitions, for the foreseeable future [12][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating meaningful adjusted free cash flow in 2024 despite a challenging commodity backdrop, projecting a top decile free cash flow yield relative to natural gas peers [12] - The company remains committed to a disciplined approach for hedging cash flows, with downside protection covering 590 million cubic feet per day in 2024 at an average floor price of $3.69 per Mcf [15][16] - Management highlighted the importance of developing assets efficiently and sustainably, with a focus on capital efficiency and cost reduction [24][30] Other Important Information - The company achieved over $35 million in capital savings during 2023, which were reinvested into the development of high-quality assets [7] - The company has repurchased approximately 4.5 million shares of common stock since initiating the repurchase program in March 2022, reducing common shares outstanding by 15% [17] Q&A Session Summary Question: What are the drivers of the 10% lower capital requirement? - The company noted that approximately 65% of the savings are due to efficiencies, while 35% comes from supply chain improvements and restructuring contracts [59] Question: How does the company view the Marcellus development? - Management expressed excitement about the Marcellus, indicating it could become a larger part of the program depending on pricing and returns [62] Question: What would lead the company to defer production? - The company assesses production on an economic basis, considering commodity prices and potential future upside when deciding on deferrals [49]