Gulfport Energy Corporation Q4 FY2025 earnings call

John Reinhart discussed 2026 development program centered on prioritizing attractive opportunities and allocating capital to maximize value, focusing on Utica's dry gas and wet gas windows. Michael Hodges summarized 2025 financial results, noting strong cash flow generation, adjusted EBITDA of $235,000,000, adjusted free cash flow of $120,000,000 in fourth quarter, and strong balance sheet with year-end leverage of 0.9 times. Also mentioned prioritizing development of high-return Utica wet gas assets, and tightening natural gas differential forecast for 2026.

2026 development program is focused on sustaining exposure to constructive natural gas environment, centering majority of development efforts in Utica's dry gas and wet gas windows, which represent highest-return wells at current commodity prices, forecasting over 75% of 2026 turn-in-line program weighted to these areas. 2025 full-year capital expenditures, excluding discretionary acreage acquisitions, totaled approx $463,000,000, including $354,000,000 of base operated D&C capital expenditures and $35,000,000 of maintenance land spending, with production for full year averaging 1.040 billion cubic feet equivalent per day.

Total capital spend for 2026 projected to be in range of $400,000,000 to $430,000,000, including $35,000,000 to $40,000,000 of maintenance land and seismic investment. Plan to deploy more than $140,000,000 towards repurchases in 2026. Forecast 2026 production to be 1.03 to 1.055 billion cubic feet equivalent per day, relatively flat over 2025 average, but fourth quarter 2026 production expected to increase ~5% compared to 2025.

Temporary factors such as known production downtime associated with offsetting operator's simultaneous operations, planned third-party midstream maintenance in 2026, and winter storm Fern creating weather-related downtime that modestly impacted full-year volumes.

Q: Good morning, guys. Thanks for the time. Michael, maybe just something on the forecasted improved forecasted price realizations. Is this you just were talking about and was very positive. Are you locking in now some basis hedges? Are you doing other things now to these improved realizations? I guess that is kind of my first point. And then remind me again, make sure I understand what is giving you all the confidence for these improved realizations or these improved price realizations.

A: Yes, Neal, thanks for the question. I will hit the first part. Certainly, we are active with our basis hedging program. I think we have got some disclosures out in our release that indicate, yes, we have been doing some basis hedging. I think that has been a part of our program over the last few years, and we have an idea of where we think there is value to capture there and tend to be opportunistic around those moves and certainly have seen some improving opportunities. I think that really leads into the second part of your question, which is what gives us confidence. I mean, it is a few things. Right? I mean, I think we have seen rising demand in those kind of local Northeastern basis markets. I think that is starting to flow through to some of the indexes. So if you think about where some of the most liquid Northeast indexes trade, we have seen those come in, and I am talking about kind of in the out years, we have seen those come in $0.15 or $0.20 over the last 30 to 60 days. I think that is an indication of that rising demand. So that is giving us additional confidence. I think the winter storm that we saw in the first quarter, I think a number of operators realized some benefit from that. I mean, I do think sometimes that we forget that those periods of volatility provide a lot of value when they occur. They are certainly unpredictable, but I think you will see that flowing through into our realizations. And then I think we are always on the lookout for ways to maximize value through our marketing team, and there have been some opportunities to do some smaller deals. I know some of our peers sometimes look for the big wins, but we have had some opportunities to do some smaller deals with some folks that aggregate gas in order to provide supply, and those typically provide an uplift to the index price as well. So I would say it is a combined effort from those things, but we do feel good that going into this year, we should see a meaningful improvement in our realizations.

Q: Good morning, team. Thank you for having me on. I wonder if we could take Neal's question a step further because, obviously, we all realize and commend you for your efforts on improving your differentials year on year. But it has been clear after a few weeks of listening to your peers that there is an overall unwillingness from them to take an improving basis at the back of growing local demand. It seems like most of them are positioning to grow with proactive discretionary capital ready to be deployed. So I was wondering if you can perhaps elaborate on your game plan on that context and maybe, on the basis of do you consider growing at some point in the future?

A: Yeah. Hey, Carlos. This is Michael. I will take the first part, John can certainly jump in. But I mean, I think it is a good question. Right? I think when we look at pricing and think about the right development cadence for Gulfport, we are thinking about, to your point, not just index pricing, but also differentials. And so the move that I have described this morning on the differential side, it is meaningful for us. On the other hand, I mean, for us to consider significant changes to our development cadence, we would be looking out the curve and probably for a more significant change that would incentivize some kind of growth. So if you look back at our history, we have traditionally been, call it, a flattish, low-single-digits type company that maximizes free cash flow. And I think that played out really well for us. I think that it helps us to kind of be consistent in our messaging, and I think that a lot of our investors like what they get from Gulfport. I think if you saw a structural shift that was, again, longer term and that was more meaningful, maybe you see some index price change beyond just what the strip shows out the curve. I think that is always an option to the company, but I think maybe why you are not hearing that from some other peers is that it has been a pretty subtle change to this point. I do feel bullish about it going forward, but I think we need to see more of that before we would likely adjust our strategy in the future.

Q: Hey, good morning, everybody. Thanks for having me on. On the operating side, it looked like you had made some pretty solid gains on your drilling efficiency. If you could just maybe touch on what some of the drivers of those gains were. On the completion side, it looked like maybe 2025 took a slight step back. Are there any changes you have in store for 2026 to maybe get that metric back up a bit?

A: Yeah, sure, Peyton. On the drilling side, we continue to get incrementally better, to your point. I think where we made the most progress in 2025 was more on our top-hole drilling efficiencies and some slight improvement on our curve and lateral. So the team was able to shave down really a couple of days per well on our top-hole design, and then some incremental gains on just curve and lateral, higher ROPs on the wells we drilled. So great job by the team there on delivering and continuing to find ways to eke out some more days of reduction. On the frac side, we did have a dip this year, a lot of things playing into that for us. I think just to keep in mind, we averaged around 18 hours pumping per day, which is pretty impressive and, quite frankly, comparable to a lot of the best peers we have in the basin. The year prior, we were averaging 21 hours a day, and that was an incrementally great year for the company and a really hard bar to consistently achieve, I would tell you. But we are always striving to get there and maintain. So a little bit in the last year, started the year a little bit slow with a drought in Ohio that caused some water sourcing issues for us, kind of the first quarter and the second quarter. That was relative to everybody in the basin as well. And then throughout the year, utilizing more spot crew work, got off to a little bit of a slow start on some spot crews to help kind of keep our production cadence in line and take advantage of the short cycle time opportunities that we saw in our development program last year. So this year, we expect that to be at or above that 18 hours, and the team is already off to a good start in achieving that.