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Gulfport Energy Is Eyeing Uptake in Production as Market Gears Up for Third Quarter Earnings
Posted by: Sarfaraz A. Khan (IP Logged)
Date: November 4, 2013 10:18AM

The independent oil and gas exploration and production firm Gulfport Energy (GPOR), which is also one of Jim Cramer’s picks, has been moving forward with its plans to increase its acreage at Ohio’s Utica Shale play. The company has recently released a production update for the third quarter. Its quarterly results are due tomorrow.

Growing Acreage

For the three months ending September 2013, the company added 9,000 gross acres to its lease holding. Currently, Gulfport has amassed impressive acreage of around 154,000 gross acres, or 144,500 net acres, at Utica Shale. Here, the company has leading permits in Columbiana, Harrison and Noble counties.

Although Gulfport Energy has operations in Southern Louisiana and Utica Shale, while the company has also been doing exploration activity in the Canadian oil sands and Northern Thailand, but it has been more focused on the Utica than anywhere else. Compared to Marcellus, Utica is relatively risky as it is still in the early stages of drilling and the area itself is less developed than Marcellus. However, it offers enormous opportunities for growth.

Both Utica and Marcellus lie at the Appalachian Basin. According to the U.S. Geological Survey, Utica Shale is home to around 38 trillion cubic feet of undiscovered technically recoverable natural gas; that is certainly not as much as Marcellus’ 84 trillion cubic feet of reserves, but it still represents a lot of oil, gas and natural gas liquids.

At Ohio, Gulfport is the second largest Utica driller with a total of 11 producing wells out of 86 permits. On the other hand, the natural gas giant Chesapeake Energy (CHK) is the largest shale driller at Utica with a total of 111 producing wells out of 532 permits. Antero Resources (AR), which came to the NYSE less than a month ago, is another major permit holder at Utica and currently has four rigs working in the region. Besides Utica, the company also has significant exposure to Marcellus shale.

Production Numbers

Last month, Gulfport Energy released impressive production numbers in which its output surpassed its previous guidance. The business achieved sales volume 12,976 barrels of oil equivalent per day (boepd), above its previous guidance of between 12,250 and 12,750 boepd. The company’s net production was 590,187 barrels of oil, 2,981,632 thousand cubic feet of natural gas and 4,480,667 gallons of natural gas liquids.

Earlier in September, Gulfport updated its investors regarding three new wells at Utica Shale; the Wagner 3-28H well, the Clay 3-4H well and the Lyon 3-27H well. The results of the three wells, based on average seven day sales rate, were very encouraging. Both Clay and Lyon produced more than 1,000 boepd while Wagner produced more than 2,600 boepd.

Gulfport Energy gets most of its production from Utica shale. The company’s quarterly production numbers from its acreage are shown in the table below.

Region wise production
Region Production (BOE)
Utica Shale 662,333
West Cote Blanche Bay 351,171
Hackberry 167,520
Bakken and other areas 12,784

Second Quarter at Glance

In the second quarter, Gulfport Energy managed to beat both top and bottom line estimates. The company posted earnings of $0.56 per share, easily beating the market’s expectations of $0.14 per share. Company reported net income of $43.8 million from revenues of $70.2 million, which was also above Wall Street’s revenue estimates of $66.12 million.

Future Outlook: Significant Uptake in Production

For the third quarter, the company is expecting production of 14,000 to 15,000 boepd due to the delays in Utica drilling. The company will hook up between four and six wells in the third quarter and 25 to 30 wells in the fourth quarter. Due to the significant uptake in activity in the fourth quarter, as compared to the third quarter, Gulfport is expecting a sequential increase in production with a exit rate of 37,000 to 50,000 boepd as it moves into 2014, which is considerably above its current production rate. For the full year, Gulfport is targeting production of between 5 million and 6 million boe.

Gulfport will release its quarterly results tomorrow after the markets close on Tuesday, Nov. 5.

Notes:

Gulfport Energy Q2 2013 Conference Call Transcript (available here)

Disclosure: This article was written by Sarfaraz A. Khan, with valuable contribution from Gohar Yousuf, research assistant at Half Bridge Business Review. Neither Sarfaraz A. Khan, nor Gohar Yousuf have any positions in the stock(s) mentioned in this article.

By Sarfaraz A. Khan and Gohar Yousuf


Stocks Discussed: GPOR, CHK, AR,
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