Gulfport Energy Corporation

Greetings and welcome to the Gulfport second quarter 2021 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jessica Antle. Thank you, Jessica. You may begin.

Thank you and good morning. Welcome to Gulfport Energy Corporation's second quarter 2021 earnings conference call. I am Jessica Ansel, Director of Investor Relations. Speakers on today's call include Tim Cutts, Interim Chief Executive Officer, and Bill Beasley, Executive Vice President and Chief Financial Officer. I would like to remind everybody that during this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, future performance, and business. We caution you that the actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we may reference non-GAAP measures. Reconciliations to the comparable gap measures will be posted on our website. An updated Gold Fork presentation was posted yesterday evening to our website in conjunction with the earnings announcement. Please review at your leisure. At this time, I would like to turn the call over to Tim.

Thank you, Jessica, and good morning, and thank you very much for joining the call today. I'm here today with Bill Deasy, who I had the pleasure of working with recently at QEP Resources. I am personally very excited to be here and look forward to sharing with you a significant value opportunity within Gulfport Energy. I would like to start by thanking our employees for their hard work during a challenging but successful restructuring process. Today, for the first time in a long time, we have a balance sheet that complements the value of our asset base with a right size corporate overhead and top quartile operating costs. We have the same high quality gas assets that you're familiar with, however, our 2021 program It's delivering strong results above historical averages, reflecting our new development plan focused on free cash flow generation, capital discipline, and value optimization. As a company, we have a new, highly engaged board of directors, and we've adopted a new business model focused on free cash flow generation and returns over production growth. We expect to use excess cash flow to continue to reduce our outstanding debt until we are able to begin returning capital to shareholders. I will begin with an update of our second quarter operational results and an overview of the development plan performance in both the Utica and the Scoot. Bill will then discuss Gulfport's financial performance and provide guidance for 2021. We have emerged from restructuring the process with a renewed focus on sustainability and delivering on key metrics outlined in our corporate sustainability report. We are very proud of the progress made in reducing our greenhouse gas and methane emissions. We recently appointed Stephanie Timmermeyer, vice president of EHS to the executive team, and she is already playing a key leadership role with regards to environmental stewardship, social responsibility, and governance of the company. Stephanie will work closely with the executive team and the board to progress our important ESG initiatives. Moving to our second quarter operational results, as shown on slide six of the IR deck, production averaged 989 million cubic feet of gas equivalent per day during the second quarter, which included a strong contribution from both the Utica and the Scoop development programs. We anticipated a slight drop in production during the third quarter as the Scoop comes off its peak production. We expect the decline to reverse in the fourth quarter when the Sixwell Angelo pad comes online in the Utica. Gulfport invested $68 million of capital in the second quarter. We continue to work towards lowering drilling and completion costs while staying primarily focused on delivering pure leading costs for MCF produced. I will explain this further as I talk through our development strategy in a few minutes. Moving forward, we are targeting a maintenance-level capital spend of approximately $300 million per year. The annual number will fluctuate slightly depending on the exact timing of our drilling and completion activity. This level of spend is expected to result in roughly one BCF equivalent per day of production. Turning now to our development plan. I'm pleased to report that our results in both the Scoop and the Utica are outperforming historical development results. On page 9 of the IRDAC, you'll find recent results from our 2021 Utica program, where production totaled 744 million cubic feet equivalent per day during the quarter. The Shannon and Hendershop wells have been on line for approximately five months and remain on plateau. Based on the current pressure decline, these wells could stay on plateau for eight to ten months, which compares favorably to the historical averages of six months or less. In addition, our MorsePAD has been online for over a month now, and we are seeing similar and encouraging early-time data. We believe that this performance is a direct result of moving to wider spacing and slightly larger frac jobs. We are currently completing the AngeloPAD using Sinoprac technology and look forward to bringing this pad online during the fourth quarter as planned. On slide 11, you will see the results of our most recent wells in the SCOOP. The wells are performing better than the historical wellport wells, which we attribute to the wider spacing and longer laterals. The 2021 SCOOP program competes economically with Utica with rates of return of approximately 80% at 275 gas and $60 oil. Looking at the economics of our forward program in both Utica and the SCOOP, we have detailed on slide 12 the compelling returns we are seeing at the varied price scenarios. During the first half of the year, we've been able to substantially improve our operating cost structure with the largest gains in the area of transportation, gathering and processing, and interest expense, largely aged by our restructuring process, which deleveraged our balance sheet and right-sized our midstream contracts. The 43 cents per MCF, or 23% year-on-year cost reduction, significantly improves our margin and is expected to lead to substantial sustainable free cash flow generation moving forward. Midstream volume commitments have been reduced to 900,000 decatherm per day gross capacity, which is well below the planned deliverability for the foreseeable future. Despite this dramatic reduction in firm transportation commitments, our right-size portfolio continues to provide diversified takeaway capacity and optionality to premium markets out of the basin. We remain keenly focused on reducing our corporate overhead And as a result, we recently flattened our organizational structure by reducing the number of executives and more appropriately sizing the organization for our planned operations. With these reductions, we are confident that we will achieve top quartile G&A costs of 12 cents per MCF for the full year of 2022. Lastly, I applaud the team's work in the field focusing on per unit LOE, which is expected to average 14 cents per MCFE for 2021, and for the continuous drive to bring these costs down even further. I'll now spend a few minutes describing Gulfport's development program. We agree that lowering drilling completion cost per foot is always important and are committed to lowering costs moving forward. We also believe that the most important outcome is to deliver the lowest cost molecule for each dollar spent, especially when looking at the first few years of production. As shown on slide 19 of the IRDAC, We are investing approximately $150 per foot to deliver more intense frack jobs that support wider space wells with the objectives of delivering superior economic outcome. The Utica has historically been developed on 1,000-foot spacing, and some operators have driven costs down by pumping smaller completions, which is starting to impact the plateau periods and lead to steeper declines. We believe that the optimal design is to target wider spacing of at least 1,250 feet, which eliminates one well drilling unit in the example shown on slide 20. At this spacing, we treat the wells with higher fluid intensity and profit and loading. We also believe that longer laterals of approximately 15,000 feet lower our DNC cost per foot and improve overall well economics, and we have redesigned our development plan to reflect this going forward. The cost to develop a four-well wider space pad versus a five-well tighter space pad is similar, but we believe that Gulfport's performance will demonstrate longer plateaus and higher cumulative production during the first few years online. Our 2021 Utica wells are demonstrating the benefit of this development approach, which will ultimately lead to greater pre-cash flow generation, superior EURs and IRs, as demonstrated on slide 20 and 21. This approach will also improve the economic performance in areas of the field with lower original gas in place. We believe that the completion approach we have taken in 2021 and plan for 2022 will support our premise, and we are encouraged by recent performance. In summary, we have emerged from our restructuring process with continuous improvement mindset focused on cost-effective production and capital discipline, supported by a strong balance sheet. We are fully committed to safely executing in the field and improving our environmental, social, and governance performance. We flattened our corporate structure, reduced overhead, and our focus on optimizing the development program to deliver strong free cash flow and the highest returns possible to our investor. I will now turn the call over to Bill to discuss our financial results and 2021 guidance.