GULFPORT ENERGY CORP Q3 FY2024 earnings call

• Repurchased approximately $50 million of common stock, expanded common stock repurchase authorization to $1 billion (54% increase).
• Lowered 2024 capital spend guidance midpoint by $15 million, with D&C capital now in range of $325 million to $335 million and maintenance leasehold guidance $50 million to $60 million.
• Increased high-margin condensate production by 68% quarter-over-quarter, added ~$20 million of discretionary acreage acquisitions, and has ~one year of incremental liquids-rich drilling locations from 2024 activity.
• Improved balance sheet by extending maturities over three years, increasing liquidity by ~$200 million, and maintaining leverage below 1 times.
• Issued 2024 Corporate Sustainability Report and achieved A grade under MIQ methane emission standard for natural gas production in Appalachia for second consecutive year.
• Strong Q3 results with adjusted EBITDA and free cash flow ahead of analyst expectations, driven by strong margins of liquids-rich turn-in-lines.
• Operational efficiencies led to $25 million in capital savings in 2024, with majority of savings allocated to shareholder returns and remainder to high-return capital projects.
• In Ohio, completed drilling on 5 gross wells, concluded 2024 turn-in-line program in Utica with 7 gross wells in Q3 and 16 gross for year, and completed 3 gross wells in SCOOP in late September.
• Strong early production results from Utica condensate pad, with four wells showing attractive condensate/NGL production rates and minimal pressure drawdown.
• Forecast over 60% of 2025 turn-in-lines to be liquids-rich weighted, up from ~37% in 2024, and 2025 maintenance leasehold and land spend forecast ~$45 million (25% decrease from 2024 high end).

During the third quarter, Gulfport achieved adjusted EBITDA of approximately $178 million and adjusted free cash flow of approximately $73 million. Production averaged 1.06 billion cubic feet equivalent per day, with a 68% quarter-over-quarter increase in high-margin condensate production. The all-in realized price for the third quarter was $3.09 per Mcfe, including cash-settled derivatives. Revenue contribution details weren't explicitly broken down by product segment in terms of percentage, but the focus was on liquids-rich production growth and margin benefits.

• Lowered 2024 D&C capital guidance midpoint by $15 million to $325 million to $335 million, maintaining maintenance leasehold guidance $50 million to $60 million.
• Forecast 2025 maintenance leasehold and land spend ~$45 million, a 25% decrease from 2024 high end.
• 2025 forecast over 60% of total turn-in-lines to be liquids-rich weighted, up from ~37% in 2024.
• Hedge position: ~65% of 2024 natural gas production hedged at avg floor price $3.63 per MMBtu; 2025 natural gas swap and collar contracts ~470 million cubic feet per day at avg floor price $3.61 per MMBtu; locked in natural gas basis exposure for ~15% of natural gas with firm delivery to Gulf Coast at attractive premiums for 2025 and 2026.

Q: Could you walk us through where the capital savings came from and how much was efficiencies or vendor costs?

A: Overall, two-thirds of savings from efficiency gains (planning, execution time, cycle time improvements) and one-third from service cost side.

Q: How do you think about your inventory and ranking of different well types?

A: Have various liquids window options, high-quality inventory with ~15%-20% returns, nimble to allocate capital based on returns, currently leaning into liquids/condensate area but can shift to gas if returns change.

Q: Should we consider the 60% liquids weight on TILs in 2025 as the new normal?

A: Liquid shift will be a fairly continuous part of the portfolio for years to come, driven by best returns for the company, with variation based on what drives highest margins.

Q: Characterize the pressure management program and its application across the portfolio?

A: Philosophy applied across portfolio, varies with commodity prices and between gas/condensate windows, benefits include increased plateau period, reduced damage, etc., transferable to condensate/lean condensate areas.

Q: Decision process behind reducing 2024 CapEx by $15 million and spending remaining $10 million?

A: Hybrid approach, allocating some savings to shareholders and redeploying some into activity, continuous assessment of highest rates of return.

Q: Trajectory of oil production from here?

A: Q3 had big jump, last quarter of 2024 may have some upside remaining, 2025 expected significant increase from 2024, moving from ~92% gas to lower gas percentage with increased liquids/NGLs.

Q: Anticipate capital program cadence next year and share repurchase cadence?

A: Capital program similar to 2024, front-loaded, with 3 rigs in late Q4, then 1 rig continuously; share repurchases viewed more on annual basis, opportunistic, not necessarily in sync with quarterly capital cadence.

Q: Will discretionary acreage acquisition continue into 2025 and what drove oil differentials?

A: Will remain opportunistic, monitor landscape for high-quality acreage; oil differentials widened due to production back half weighting and linear average of WTI numbers, but month-to-month differentials remained strong.

Q: Flexibility in liquids mix and efficiencies as you transition to more liquids-weighted program?

A: Can pivot between liquids and gas based on commodity price changes, industry continues to improve capital efficiencies and operational execution, expect more efficiencies moving forward with continued focus on maximizing free cash flow and shareholder returns