Gulfport Energy Corporation

Hello, and welcome to the Gulfport Energy Corporation first quarter 2022 earnings conference call and webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Jessica Antle, Director of Investor Relations. Jessica, please go ahead.

Thank you and good morning. Welcome to Gulfport Energy Corporation's first quarter 2022 earnings conference call. I am Jessica Ansell. Speakers on today's call include Tim Cutt, Chief Executive Officer, and Bill Beezy, 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 GAAP measures will be posted on our website. An updated Gulfport 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.

Thanks, Jessica, and good morning, and thank you for joining the call. I will begin this morning with a summary of the first quarter highlights, followed by an operational update before turning the call to Bill to discuss the financials. As you saw from our release, we had a very strong quarter, delivering over 1 billion cubic feet equivalent of gas per day and $117 million of free cash flow. We exited the quarter with a leverage ratio of 0.7 and liquidity of $568 million. We began executing our share buyback program, and the Board has recently approved an additional $100 million, taking the program to $200 million, which represents approximately 50% of expected free cash flow. Turning to production, our strong first quarter production was driven by the continued outperformance of our 2021 development program, excellent uptime during the winter months, and the addition of five new scoop wells performing above expectations. Given the time of our development program, we expect production to decline in the second and third quarters before growing significantly during the fourth quarter. As previously mentioned, we have moved to a continuous drilling program in the East, which is expected to support modest year-on-year production growth and a more consistent production profile moving forward. With the encouraging well results in the scoop, we will also consider adding additional activity in the second half of the year next year to help drive operational efficiencies and to retain critical crews and equipment. Overall, we expect to grow production year on year by more than 5% and stay above one billion cubic feet equivalent per day throughout 2023. Turning to our development program, I'm pleased to report that our results in both the Scoop and Utica continue to outperform historical wells. We remain focused on delivering peer leading development cost for MCFE and our implementation of wider spacing and more intensive completion designs is yielding strong results. On the back of these strong results, we see opportunities to increase our land position in the Utica, leading to sustainable organic growth, which presents a path to additional production growth beyond what is currently contemplated. During the quarter, we turned in line five wells from the Nelda pad in the Scoop. Building on the strong results we were experiencing in the Utica, we used a similar design approach, optimizing the completion pump to well spacing and desired recoveries. This has resulted in higher flowing pressures, higher rates, and more sustained production than expected, and even stronger than our recent 2021 turn-in-line wells. These strong results support our overall development approach, and we are excited about what it means for our follow-up scoop SCR and O'Neill developments scheduled to come online later this year. In the Utica, we did experience a casing failure while fracking a well on our Charlotte pad. The casing appears to have failed in the seam of the 5 1⁄2-inch welded pipe. We have run 4 1⁄2-inch liners in each of the three completed Charlotte wells, and out of an abundance of caution, we are in the process of running liners in three additional wells on the Clark pad that contain similar pipe from the same shipment. When this happened, we released the frack crew and do not expect to get the crew back to complete the three remaining Clark wells for several months, which may put pressure on our ability to achieve the higher end of our production guidance range. We will understand the FRAC schedule much better by the time of our second quarter call in August and will provide further updates at that time. We would note that this impact is purely timing and should not impact the planned exit rate in 2022. On capital, the repair work on the previously discussed casing remediation in the Utica has pushed us to the higher end of our original capital guidance range. In addition, we are experiencing inflationary pressures above our original assumptions of 10%. Fuel, sand, and pipe costs have moved up substantially, and due to being on short-term contracts, we have seen increases in rig and frac rates. As a result, we are now expecting inflation to be 15% to 20%. Together, these items have resulted in updating the midpoint of our capital guidance to $400 million in the current environment. However, improvements in price have more than offset this impact, resulting in an increase of our forecasted free cash flow in 2022. We continue to focus on improving our total per unit operating costs and are identifying improvement efficiencies across the company. We delivered a total operating cost of $1.26 for MCFE, which represents a slight increase from 2021, primarily due to increased production taxes and a seasonal increase in LOE associated with winterizing our equipment, increased water hauling driven by recent turn-in lines, and the addition of compression to help offset base declines. In summary, we remain focused on cost-effective production, capital discipline, and delivering peer-leading development costs for MCFE. We have implemented wider spacing and more intensive completion designs, which continue to deliver strong results. Our low leverage, along with significant free cash flow, should allow us to organically grow the business while returning significant capital to our shareholders. I'm pleased to be increasing our share repurchase program by $100 million this which has the company returning approximately 50% of 2022 expected free cash flow to shareholders. I'll now turn the call over to Bill to discuss the financial results.