Gulfport Energy Corporation

Greetings and welcome to the Gulfport Energy Corporation's third quarter 2023 earnings 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 Ansell. Thank you. You may begin.

Thank you and good morning. Welcome to Goldport Energy Corporation's third quarter 2023 earnings conference call. I am Jessica Antle, Vice President of Investor Relations. Speakers on today's call include John Reinhart, President and CEO, Michael Hodges, Executive Vice President and CFO. In addition, we also have Matt Rucker, Senior Vice President of Operations, who will be available for the Q&A portion of today's call. I would like to remind everybody that during this conference call, the company may make certain forward-looking statements relating to the 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 reference non-GAAP measures. Reconciliations to the comparable gap measures will be posted on our website. An updated Goldport presentation was posted yesterday evening to the 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 third quarter results as we continue to make steady progress. demonstrated by our strong production profile, robust margins, improvement in operational efficiencies, high-quality inventory additions, and the continued focus on returning capital to shareholders through our common share repurchase program. Moving to our third quarter results, our financial performance remains strong, generating $160 million of adjusted EBITDA and $49 million of adjusted free cash flow, excluding discretionary acreage acquisitions. Our average daily production totaled 1.056 billion cubic feet equivalent per day ahead of analysts' expectations and driven by improved cycle times accelerating the timing of wells brought online in the quarter, as well as the continued strong well performance from our development programs. During the third quarter, the company spud five gross wells all within Ohio, including two Marcellus wells in Belmont County. This Marcellus pad was drilled and completed during the quarter, marking the company's first operated Marcellus development on our stack pay acreage. We began flow back operations in late October and look forward to further discussing the results as well as potential future Marcellus development as we gain meaningful production history from the current wells. As a reminder, we see significant upside value here. with our Marcellus acreage holding the potential to unlock approximately 40 to 50 wells of incremental inventory for the company. On the completions front, we brought online five gross wells during the quarter, all targeting the Utica. These wells were turned in line 17 days ahead of our original budget. We continue to deliver strong operational execution and realized consistent cycle time improvements on both the drilling and completions front in the third quarter. On the drilling side, we experienced a 13% quarter-over-quarter improvement in footage drilled per day, and when compared to year-end 2022, we have increased our footage drilled per day by over 45%. The team recently completed the most efficient well in Gulfport's Utica history relative to lateral lengths greater than 15,000 feet, achieving a record 22-day spud-to-rig release performance on a Utica well that reached approximately 21,000 feet of lateral. On the completion side, we continue to see significant efficiency improvements in the frac and drill-out phases of our operations, improving average frac pumping hours per day by 16% in the third quarter and average plugs drilled per day by almost 90%. resulting in quarterly average of 18.4 frac pumping hours per day and 35 plugs drilled out per day. These efficiencies and corresponding cycle time reductions play an integral role in our corporate level returns, significantly improving turn in line timing and ultimately accelerating cash flows. Driven by the team's outstanding performance with driving efficiencies up and costs down, we forecast the company has realized over $35 million in capital savings on our full year 2023 drilling and completion budget. We believe these improvements will result in lower maintenance capital expenditures going forward and translate into meaningful capital efficiency gains for our 2024 program. As we have mentioned before, we continue to focus on our pressure-managed production approach. which is generating strong results with minimal average initial pressure drawdown. In the Utica, our recent wells continue to outperform, and we currently forecast the average EUR estimates for our 2023 development program will be in excess of 2.2 billion cubic feet per 1,000 feet of lateral, representing a 60% improvement since 2020, as shown in our investor presentation on slide 13. We firmly believe our development planning with optimized well spacing, enhanced stimulation treatments, and pressure managed flow back will lead to longer production plateau periods, shallower declines, improved EURs, and improved economics and capital efficiencies relating to right sizing of production facilities and compression. In the scoop, our development program also continues to respond very positively to our pressure managed production approach. with higher than expected oil yields and lower average initial pressure drawdown. Looking at slide 14 of our investor deck, you can see our program average EUR per 1,000 feet of lateral in the scoop has improved by over 80% since 2020. Our operation and reservoir teams have been actively reviewing our historical development practices for improvements, and we are confident in our ability to take our Utica efficiency gains realized this year and apply meaningful efficiency improvements to our upcoming development program in the Scoop. In terms of current activity, as noted above, our operating team's high level of efficiency and cost reduction focus has resulted in over 35 million in capital savings year to date, and we have elected to reinvest these savings into the development of our high-quality assets. As mentioned last quarter, through our ongoing maintenance leasing efforts, applying a portion of these savings has facilitated the company's ability to improve our average working interest in nearly every well in our 2023 program. This results in an increase in our net well counts and further contributes to our expected production and drilling and completion capital results for the year. In addition, we have elected to accelerate future planned activity, predominantly focused in the liquids area of both the Utica and the Scoop during the fourth quarter of 2023. Specifically, the company is accelerating planned drilling operations of four wells in the Utica, two of which will be completed in the fourth quarter. Also commencing drilling of a three-well Scoop pad And lastly, initiate fracturing operations on a multi-well pad in the Utica. Even with this acceleration of activity, the benefit of which will be realized in 2024 and beyond, we are pleased to be in a position to further lower our 2023 total capital budget while also increasing our 2023 production guidance. Again, highlighting the strong operational performance our team is delivering quarter over quarter. We now forecast a full-year drilling and completion capital guidance range of $385 million to $395 million and full-year production to be in the range of 1.045 to 1.055 billion cubic feet equivalent per day, an increase of approximately 7% when compared to full-year 2022 production levels. Turning to land expenditures, we lowered our 2023 guidance and now plan to allocate $50 to $60 million on maintenance, leasehold, and land investment. This spend is focused on bolstering our 2023 and 2024 drilling programs and facilitating increases in our working interest in lateral footage and units we plan to drill near term. In addition, We announced last quarter we continue to actively pursue attractive discretionary acreage acquisition opportunities funded through our robust adjusted free cash flow. Through September 30, 2023, we have invested roughly $25 million in these acquisition opportunities, primarily targeting the liquids-rich area of the Utica. These acquisitions expand our high-quality resource depth, which is predominantly held long-term by production, and will provide further optionality to our near-term development plans. We continue to forecast approximately $40 million of discretionary acreage acquisitions during 2023, with expectations to add roughly 1.5 years of core liquids-rich drilling inventory at our current development pace, with an average cost of approximately $1.5 million per location. In closing, looking ahead to 2024, our strong financial foundation Improved capital efficiency, lower cost structure, and strong well performance provides us with significant flexibility as we finalize our plans for our 2024 development program. We look forward to returning to our liquids-rich scoop asset, and given the increase in liquids pricing we have witnessed during 2023, we have significant optionality in the Utica to continue development of our natural gas acreage while also augmenting our development plan with several liquids-rich Utica locations as part of our 24 program. The company will continue to prioritize the return of capital to our shareholders through common stock repurchases, as evidenced by the recent expansion of our share repurchase authorization by 63%, and plan to continue allocating substantially all of our adjusted free cash flow to common share repurchases after discretionary acreage acquisitions. Now, I will turn the call over to Michael to discuss our financial results.