Gulfport Energy Corporation Reports Third Quarter 2019 Financial and Operating Results

OKLAHOMA CITY, Oct. 31, 2019 (GLOBE NEWSWIRE) -- Gulfport Energy Corporation (NASDAQ: GPOR) (“Gulfport” or the “Company”) today reported financial and operational results for the three-months and nine-months ended September 30, 2019 and provided an update on its 2019 activities.  Key information includes the following:

• Net production averaged 1,527.0 MMcfe per day during the third quarter of 2019
• Net loss of $48.8 million, or $(0.31) per diluted share, for the third quarter of 2019
• Adjusted net income (non-GAAP) of $39.0 million, or $0.24 per diluted share, for the third quarter of 2019
• Adjusted EBITDA (non-GAAP) of $219.4 million for the third quarter of 2019
• Cash provided by operating activity of $217.6 million for the third quarter of 2019
• Generated Free Cash Flow (non-GAAP), excluding working capital changes as defined and reconciled below, of $103.4 million for the third quarter of 2019
• Forecasted 2019 full year net production is estimated to average at the midpoint of the Company's previously provided guidance range of 1,360 MMcfe to 1,400 MMcfe per day.
• Significant level of new hedges added for 2020 with 548 BBtu per day of natural gas fixed price swaps at an average fixed price of $2.88 per MMBtu
• Completed certain non-core asset divestitures
• Total liquidity of $626.5 million, including cash on hand and borrowing capacity of  approximately $616.4 million under the Company's revolving credit facility

See the supplemental tables at the end of this press release for a reconciliation of non-GAAP measures including adjusted net income, EBITDA, adjusted EBITDA, operating cash flow and free cash flow.

Chief Executive Officer and President, David M. Wood, commented, "Gulfport’s third quarter was underscored by our continued strong performance from each of our operating areas and achieving the next phase of our 2019 plan provided at the start of the year, free cash flow generation.  We exceeded our production targets while adhering to our capital budget, improved our balance sheet through the previously announced repurchase of senior notes and generated significant cash flow from our 2019 activities. Our quality core assets have us on track to deliver on all our operational guidance metrics, while forecasting total capital spend, net of the planned divestiture of certain non-operated assets, within the original budget provided in January.”

Mr. Wood continued, “As we focus towards 2020 and beyond, our message remains consistent and we carry forward our commitment to allocating capital in a disciplined manner, focusing on returns, operating within our cash flow and maintaining strong liquidity and reasonable leverage metrics. We continue to put an emphasis on bottom-line returns and expect our 2020 capital plan to generate neutral to positive cash flow with production an output not a target."

Balance Sheet and Liquidity
As of September 30, 2019, Gulfport had cash on hand of approximately $10.1 million. As of September 30, 2019, Gulfport’s $1.4 billion revolving credit facility, under which Gulfport has an elected commitment of $1.0 billion, had outstanding borrowings of $135.0 million and outstanding letters of credit totaling $248.6 million. The Company's total liquidity as of September 30, 2019 of approximately $626.5 million, which included cash on hand and borrowing capacity of approximately $616.4 million under the Company's revolving credit facility.

Stock and Bond Repurchases
In January 2019, Gulfport's board of directors authorized the Company to acquire a portion of its outstanding common stock within a 24-month period. There were no additional share purchases made during the third quarter of 2019.

Gulfport repurchased approximately $105 million principal amount of its senior notes for a total cash spend of approximately $80 million during the third quarter of 2019.

Subject to market conditions, the Company intends to opportunistically repurchase its outstanding debt or stock going forward, but is under no obligation to do so.

Non-Core Asset Divestitures
Gulfport recently agreed to monetize certain overriding royalty interests associated with assets held in the Bakken to a third party for approximately $8.0 million in cash. Net production from the assets averaged 68.6 Boe per day during the nine months ended September 30, 2019. The effective date of the transaction is July 1, 2019 and the transaction is expected to close in the fourth quarter of 2019.

The Company continues to progress on the previously announced divestiture of water infrastructure assets Gulfport holds across its SCOOP position.  Entry into a definitive agreement for this process is expected prior to year-end 2019 with closing shortly thereafter.

Gulfport is also pursuing a potential sale of certain non-operated interests in the Utica Shale.  The proceeds of this potential sale would offset the larger-than-anticipated non-operated capital spend in the Utica Shale incurred during the nine-months ended September 30, 2019. Gulfport expects to enter into a definitive agreement on this divestiture prior to year-end 2019.

Production and Realized Prices
Gulfport’s net daily production for the third quarter of 2019 averaged approximately 1,527.0 MMcfe per day. For the third quarter of 2019, Gulfport’s net daily production mix was comprised of approximately 93% natural gas, 5% natural gas liquids ("NGL") and 2% oil.

The table below summarizes Gulfport’s third quarter of 2019 production by asset area:

2019 Capital Expenditures
For the nine-month period ended September 30, 2019, Gulfport incurred operated drilling and completion ("D&C") capital expenditures of $423.7 million and non-operated D&C expenditures of $72.6 million. In addition, land capital expenditures incurred totaled $33.1 million for the nine-month period ended September 30, 2019.

Gulfport's operated D&C expenditures for the nine-month period ended September 30, 2019 are consistent with the Company’s expectations while non-operated D&C expenditures have been higher than anticipated. Gulfport intends to recover a portion of the non-operated D&C capital overspend through the monetization of certain non-operated Utica Shale interests during the fourth quarter of 2019. Net of the planned divestiture of certain non-operated assets, total capital expenditures for 2019 are expected to be within in the previously provided guidance range of $565 million to $600 million.

Operational Update
The table below summarizes Gulfport's activity for the nine-month period ended September 30, 2019 and the number of net wells expected to be drilled and turned-to-sales for the remainder of 2019:

Utica Shale
In the Utica Shale, during the third quarter of 2019, Gulfport spud two gross and net operated wells and turned-to-sales 16 gross (10.5 net) operated wells.

During the third quarter of 2019, net production from Gulfport’s Utica acreage averaged approximately 1,244.1 MMcfe per day.

For the nine-month period ended September 30, 2019, Gulfport spud 13 gross (11.4 net) operated wells. The wells drilled during this period had an average lateral length of approximately 12,200 feet. Normalizing to an 8,000 foot lateral length, Gulfport's average drilling days from spud to rig release totaled approximately 18.6 days, a decrease of 5% over full year 2018. In addition, Gulfport turned-to-sales 47 gross (41.5 net) operated wells with an average stimulated lateral length of approximately 9,800 feet during the nine-month period ended September 30, 2019.

At present, Gulfport has one operated drilling rig running in the play.

SCOOP
In the SCOOP, during the third quarter of 2019, Gulfport spud one gross and net operated well.

During the third quarter of 2019, net production from Gulfport's SCOOP acreage averaged approximately 281.5 MMcfe per day.

For the nine-month period ended September 30, 2019, Gulfport spud eight gross (6.7 net) operated wells. The wells drilled during this period had an average lateral length of approximately 8,400 feet. Normalizing to a 7,500 foot lateral length, Gulfport's average drilling days from spud to rig release totaled approximately 59.0 days, a decrease of 7% over full year 2018. In addition, Gulfport turned-to-sales nine gross (8.7 net) operated wells with an average stimulated lateral length of approximately 7,100 feet during the nine-month period ended September 30, 2019.

At present, Gulfport has one operated drilling rig running in the play.

2019 Capital Budget and Production Guidance
Gulfport reaffirms its expectation that 2019 total capital expenditures will range between $565 million to $600 million after adjusting for the planned divestiture of certain non-operated assets. With this level of capital spend, Gulfport continues to forecast its 2019 average daily net production will range between 1,360 MMcfe to 1,400 MMcfe per day.

Based on actual results during the nine-month period ended September 30, 2019, and utilizing current strip pricing at regional pricing points the Company sells its products, Gulfport reiterates its expected 2019 natural gas and oil differential guidance. Gulfport now forecasts its expected 2019 realized NGL price, before the effect of hedges and including transportation expense, to be approximately 35% of WTI .

The table below summarizes the Company’s full year 2019 guidance:

Derivatives
Gulfport regularly hedges a portion of its expected production to lock in prices and returns that provide certainty of cash flow to execute on its capital plans. The table below details the Company's hedging positions as of October 31, 2019:

Presentation
An updated presentation has been posted to the Company’s website. The presentation can be found at www.gulfportenergy.com under the “Company Information” section on the “Investor Relations” page. Investors should note that Gulfport announces financial information in SEC filings, press releases and public conference calls.  Gulfport may use the Investors section of its website (www.gulfportenergy.com) to communicate with investors.  It is possible that the financial and other information posted there could be deemed to be material information. Information on the Company’s website does not constitute a portion of this press release.

Conference Call
Gulfport will hold a conference call on Friday, November 1, 2019 at 8:00 a.m. CDT to discuss its third quarter of 2019 financial and operational results and to provide an update on the Company’s recent activities.

Interested parties may listen to the call via Gulfport’s website at www.gulfportenergy.com or by calling toll-free at 866-373-3408 or 412-902-1039 for international callers.  A replay of the call will be available for two weeks at 877-660-6853 or 201-612-7415 for international callers.  The replay passcode is 13695468.  The webcast will also be available for two weeks on the Company’s website and can be accessed on the Company’s “Investor Relations” page.

About Gulfport
Gulfport is an independent natural gas and oil company focused on the exploration and development of natural gas and oil properties in North America and is one of the largest producers of natural gas in the contiguous United States. Headquartered in Oklahoma City, Gulfport holds significant acreage positions in the Utica Shale of Eastern Ohio and the SCOOP Woodford and SCOOP Springer plays in Oklahoma. In addition, Gulfport has an approximately 22% equity interest in Mammoth Energy Services, Inc. (NASDAQ:TUSK) and has a position in the Alberta Oil Sands in Canada through its 25% interest in Grizzly Oil Sands ULC. For more information, please visit www.gulfportenergy.com.

Forward Looking Statements
This press release includes “forward-looking statements” for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that Gulfport expects or anticipates will or may occur in the future, future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, repurchases of our outstanding debt or equity, the timing and completion of asset sales, competitive strength, goals, expansion and growth of Gulfport's business and operations, plans, market conditions, references to future success, reference to intentions as to future matters and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by Gulfport in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with Gulfport's expectations and predictions is subject to a number of risks and uncertainties, general economic, market, credit or business conditions that might affect the timing and amount of the repurchase program; the opportunities (or lack thereof) that may be presented to and pursued by Gulfport; Gulfport’s ability to identify, complete and integrate acquisitions of properties and businesses; Gulfport’s ability to achieve the anticipated benefits of its strategic initiatives, including the potential divestiture of certain water infrastructure assets Gulfport holds across its SCOOP position; competitive actions by other oil and gas companies; changes in laws or regulations; and other factors, many of which are beyond the control of Gulfport. Information concerning these and other factors can be found in the Company's filings with the Securities and Exchange Commission, including its Forms 10-K, 10-Q and 8-K. Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and there can be no assurances that the actual results or developments anticipated by Gulfport will be realized, or even if realized, that they will have the expected consequences to or effects on Gulfport, its business or operations. Gulfport has no intention, and disclaims any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.

Investor Contact:
Jessica Antle – Director, Investor Relations
jantle@gulfportenergy.com
405-252-4550

Explanation and Reconciliation of Non-GAAP Financial Measures
EBITDA is a non-GAAP financial measure equal to net (loss) income, the most directly comparable GAAP financial measure, plus interest expense, income tax (benefit) expense, accretion expense, depreciation, depletion and amortization and impairment of oil and gas properties. Adjusted EBITDA is a non-GAAP financial measure equal to EBITDA less non-cash derivative loss (gain), insurance proceeds, litigation settlement, rig terminations fees, gain on debt extinguishment and (income) loss from equity method investments. Cash flow from operating activities before changes in operating assets and liabilities is a non-GAAP financial measure equal to cash provided by operating activity before changes in operating assets and liabilities and inclusive of capitalized expenses incurred during the given period. Free cash flow is a non-GAAP measure defined as cash flow from operating activities before changes in operating assets and liabilities (as defined above) less capital expenditures incurred. Adjusted net income is a non-GAAP financial measure equal to pre-tax net (loss) income less non-cash derivative loss (gain), impairment of oil and gas properties, insurance proceeds, litigation settlement, rig terminations fees, gain on debt extinguishment and (income) loss from equity method investments. The Company has presented EBITDA, adjusted EBITDA, adjusted net income, cash flow from operating activities before changes in operating assets and liabilities and free cash flow because it uses these measures as an integral part of its internal reporting to evaluate its performance and the performance of its senior management. These measures are considered important indicators of the operational strength of the Company's business and eliminate the uneven effect of considerable amounts of non-cash depletion, depreciation of tangible assets and amortization of certain intangible assets. A limitation of these measures, however, is that they do not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company's business. Management evaluates the costs of such tangible and intangible assets and the impact of related impairments through other financial measures, such as capital expenditures, investment spending and return on capital. Therefore, the Company believes that these measures provide useful information to its investors regarding its performance and overall results of operations. EBITDA, adjusted EBITDA, adjusted net income, cash flow from operating activities before changes in operating assets and liabilities and free cash flow are not intended to be performance measures that should be regarded as an alternative to, or more meaningful than, either net income as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. In addition, EBITDA, adjusted EBITDA, adjusted net income and cash flow from operating activities before changes in operating assets and liabilities are not intended to represent funds available for dividends, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The EBITDA, adjusted EBITDA, adjusted net income, cash flow from operating activities before changes in operating assets and liabilities and free cash flow presented in this press release may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures used in the Company's various agreements.

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