Gulfport Energy Corporation

Hello and welcome to the Gulfport Energy Corporation first quarter 2023 earnings call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Jessica Antle, Director of Investor Relations. Please go ahead, Jessica.

Thank you, Kevin, and good morning. Welcome to Gulfport Energy Corporation's first quarter 2023 earnings conference call. I am Jessica Ansell, Director of Investor Relations. Speakers on today's call include John Reinhart, President and Chief Executive Officer, Michael Hodges, Executive Vice President and Chief Financial Officer. In addition, Matthew Rucker, Senior Vice President of Operations, will be available for the Q&A portion of today's call. 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 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 make reference to non-GAAP measures. Reconciliations to those GAAP-comparable measures will be posted on our website. An updated Goldport 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 John Reinhart, President and CEO.

Thank you, Jessica, and thank you to everyone for listening to our call. I'm pleased to provide highlights today on the company's performance in the first quarter, which includes production, adjusted EBITDA, and adjusted free cash flow exceeding analyst estimates, capital cost deflation realizations, strong well productivity, and operational cycle times outpacing expectations, all of which facilitate high confidence in our 2023 program. To open, I would first like to welcome Michael and Matthew to the Gulfport team. Michael brings over 20 years of experience as a seasoned financial leader with deep expertise in the oil and gas industry, and much of his career spent with companies operating in the Appalachian and Anadarko basins. Matthew also possesses substantial knowledge of the Appalachian Basin and holds a decade of experience focused on operational excellence and low-cost leadership, which plays an integral role as we continue our efforts to improve capital efficiencies and enhance margins. I've had the pleasure of working with both Michael and Matthew, and when combined with the many talented operational and support individuals at Gulfport, creates a team that is extremely experienced in both operating basins, holds a proven track record of operational execution and is known for identifying and executing on opportunities for improvement that maximize value. The company will remain focused on actions that facilitate the sustainable development of our quality inventory, enhance margins, and optimize efficiencies within our capital programs, all while maintaining an attractive balance sheet and utilizing our top quartile free cash flow yield to enhance shareholder returns and position the company for success. Returning to our first quarter highlights, the company generated $63.1 million of adjusted free cash flow during the quarter. allowing us to continue returning capital to our shareholders while improving our already strong financial position as evidenced by our debt reduction of $145 million and the decrease of our financial leverage ratio to 0.7 times. Our average daily production for the quarter totaled 1.057 billion cubic feet equivalent per day ahead of analysts' expectations driven by the continued outperformance of our 2022 development program's well productivity and strong base production. During the first quarter, the company drilled and rig released eight gross wells, seven of which were in the Utica. On the completion side, we completed five gross wells during the quarter, all within the Utica. Cycle time efficiency improvements were realized on the operational planning, drilling, and completions front during the first quarter, which resulted in the team accelerating our first Utica pad turn-in line two weeks ahead of schedule. This was our three-well barber ridge pad located in Monroe County, which began flowing in early April with encouraging results compared to historic wells in the same area. Optimized completions and a pressure-managed production approach has contributed to strong pad production rates with minimal average initial pressure drawdown. The company's development approach continues to yield repeatable, consistent results, and we forecast these Monroe County wells to be in line on an EUR per foot of lateral basis with our top tier development in other areas of the play. In terms of activity, we are currently running one drilling rig in Ohio. and remain on track to spud Gulfport's first two Marcellus wells in Belmont County, Ohio during the third quarter of 2023. We look forward to discussing more about this development later in the year, which has the potential to unlock approximately 40 to 50 wells of incremental inventory additions for the company. In the scoop, we recently concluded our drilling program for 2023, and plan to return to a more historic level of activity in Oklahoma in 2024. The company currently has active frack crews in both asset areas and expects to turn in line over 50% of our forecasted 2023 activity in the second quarter of this year. Strong well productivity, base production performance, and expected continuation of cycle time improvements in 2023 leave us confident in realizing our expected production for the full year, and we are reiterating our 2023 guidance range of 1.0 to 1.04 billion cubic feet equivalent per day, and currently forecast the company to average toward the high end of the range for the full year. The company is beginning to realize modest service cost reductions in our 2023 capital program, primarily relating to savings in the mid-single-digit range on certain high-spend completion services, and combined with the expected operational efficiency improvements, facilitates confidence in our full-year guidance range for capital expenditure of $425 million to $475 million. The team will continue to focus on operational improvements that are expected to translate into further savings in 2023, and we will provide updates in future quarters. In our investor deck on slide 10, we have included a more detailed outlook on our expected 2023 capital and production cadence. Production costs for the first quarter were $1.24 per million cubic feet equivalent, below the midpoint of our full-year guidance range of $1.21 to $1.29 per million cubic feet equivalent. Lease operating expenditures for the quarter were primarily driven by non-operated charges and higher than forecasted water volumes and associated disposal costs driven by our strong production. The teams continue to aggressively work opportunities to optimize and reduce our per unit operating costs to improve on both LOE and midstream costs during the year. During the quarter, the company maintained our top quartile G&A spend with our reoccurring cash G&A totaling 10 cents per million cubic feet equivalent. As previously discussed, the company is executing on accretively sold opportunities that increase our resource depth and provide optionality to our future development plans. We're actively pursuing these opportunities and will provide an update to our efforts as we progress throughout the year. In closing, the current commodity environment reinforces the importance of responsible, efficient, and sustainable development of our assets and the focus of our team to enhance margins, optimize efficiencies, and protect the financial strength of the company. Our intention is to return substantially all of our adjusted free cash flow to our shareholders through common share purchases after accounting for opportunistic acquisitions of accretive leasehold opportunities to further support the company's development in the years ahead. Our strong first quarter results, both financially and operationally, positions the company to deliver attractive results while providing strategic optionality throughout 2023 and beyond. Now I will turn the call over to Michael to discuss our financial results.