Gulfport Energy’s Production is on Track Despite Deferred Activity

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Written By Faith Boluwatife

Gulfport Energy’s (NYSE: GPOR) Q1 2024 results, highlighted solid performance with production surpassing internal expectations by a slight margin. Although the company deferred some Q2 2024 activities due to current market conditions, it remains confident in meeting its 2024 production targets.

Q1 2024 Results

Credits: DepositPhotos

Gulfport achieved a production rate of 1.054 billion cubic feet equivalent (Bcfe) per day in Q1 2024, in line with analyst consensus and exceeding planned production targets by a couple of percentage points.

The company also managed to keep its capital expenditures slightly below the budgeted amount for the quarter.

Financial Performance

During Q1 2024, Gulfport realized a negative $0.11 differential to NYMEX for natural gas, which was better than anticipated. Looking ahead, the company expects wider differentials later in 2024 due to seasonal factors and higher NYMEX gas prices.

Despite this, Gulfport reaffirmed its full-year guidance, projecting a negative $0.20 to negative $0.35 differential for the entire year. Current modeling suggests a slightly narrower full-year differential of negative $0.25, reflecting the company’s operational adjustments.

Gulfport reported approximately $39 million in adjusted free cash flow for Q1 2024, bolstered significantly by $65 million in realized hedging gains. Given its front-loaded capital expenditures in the first half of 2024, Gulfport anticipates higher free cash flow generation in the latter half of the year.

Hedging Strategy

Gulfport has taken proactive steps to mitigate market risks through strategic hedging. As of now, the company has hedged around 38% of its projected 2025 natural gas production using swaps and collars. These financial instruments provide Gulfport with price certainty and stability amid fluctuating market conditions.

With current 2025 strip prices indicating positive trends, Gulfport estimates potential free cash flow of approximately $400 million before hedges for 2025, with hedging activities potentially boosting this figure to $440 million.

Updated 2024 Outlook

While Gulfport has deferred some development and completion (D&C) activities from Q2 2024 to the latter half of the year due to prevailing natural gas prices, the company has reaffirmed its full-year guidance. Gulfport anticipates minimal impact on its overall 2024 production despite the adjustments.

Based on current market strip prices for 2024, Gulfport projects oil and gas revenue of approximately $1.037 billion.

This includes adjustments for narrower natural gas differentials as previously mentioned. The company estimates the value of its 2024 hedges to be around $226 million, contributing to a projected free cash flow of $298 million for the year. This projection is heavily weighted towards the second half of 2024.

Share Repurchase Program

Gulfport remains committed to enhancing shareholder value through its ongoing share repurchase program. In Q1 2024 alone, the company repurchased approximately 0.21 million shares at an average price of $140.39 per share, amounting to $29.5 million in share repurchases.

This represents about 76% of the adjusted free cash flow generated during the quarter. As of the end of Q1 2024, Gulfport had $221 million in remaining capacity under its $650 million share repurchase program.

$300 Million Cash flow Generation

Credits: DepositPhotos

Looking forward, Gulfport Energy anticipates generating approximately $300 million in free cash flow for 2024, driven primarily by its robust hedging strategies amidst challenging market conditions.

With promising projections for 2025 and ongoing improvements in operational efficiency, Gulfport’s estimated valuation suggests good potential upside for investors. For those seeking exposure to the energy sector amid evolving market dynamics, Gulfport Energy presents an intriguing opportunity.


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