Gulfport Energy Corporation

Greetings and welcome to Gulfport Energy Corporation fourth quarter 2024 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, Ms. Jessica Antle. Thank you, Ms. Antle. You may begin.

Thank you and good morning. Welcome to Gulfport Energy Corporation's fourth quarter and full year 2024 earnings conference call. I am Jessica Ansell, Vice President of Investor Relations. Speakers on today's call include John Reinhart, President and CEO, and Michael Hodges, Executive Vice President and CFO. In addition, Matthew Rucker, Executive Vice President and Chief Operating Officer, 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 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 make reference to non-GAAP measures. Reconciliation 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 John Reinhart, President and CEO.

Thank you, Jessica. Good morning, everyone, and thank you for joining us on today's call. On behalf of the Board of Directors and all employees of Gulfport Energy, I would like to congratulate Matthew Rucker on his well-deserved promotion to Executive Vice President and Chief Operating Officer. This promotion is a recognition of the leadership Matthew has provided the company over the past couple years in leading the operations team. The successes achieved operationally have been paramount in building a culture of continuous improvement, delivering outstanding execution efficiencies and cost reductions throughout our development program. We are looking forward to his future contributions to the company as we continue to strive for best-in-class results for the benefit of all Gulfport Energy stakeholders. I will begin my comments discussing the 2025 development program we announced yesterday alongside earnings, and then highlight a few points that define our strong 2024 performance. Building on our momentum from last year, Gulfport's 2025 development program reflects significant efficiency gains and portfolio capital allocation optimizations that will allow us to maintain flat total production and flat total base capital invested while substantially growing the company's expected liquids production by 30% year over year. The 2025 program is focused on sustaining the company's exposure to a constructive natural gas environment and delivering enhanced hydrocarbon diversification by targeting the lean condensate Utica and low low-cost Marcellus condensate windows, all resulting in adjusted free cash flow generation that is estimated at today's commodity prices to be more than double compared to the 2024 results. And consistent with last year regarding our adjusted free cash flow allocation framework, we plan to return substantially all 2025 adjusted free cash flow, excluding discretionary acreage acquisitions, through common stock repurchases. Total capital spend for the year is projected to be flat and in the range of $370 million to $395 million, which includes $35 to $40 million of maintenance land and leasehold investment. Cost improvements and capital allocation to inventory additions over the past two years facilitates a 2025 development program that delivers a reduction of our annual operated drilling and completion capital on a per foot of completed lateral basis by approximately 20% when compared to 2024. This substantial efficiency gain is driven by roughly half operational efficiencies and service cost improvements, with the remainder being a function of well-mixed optimization. The company's operating teams continue to drive efficiencies up and service costs down. When combined with the 2025 portfolio allocation towards Appalachia Liquids, while also maintaining our low decline scoop asset production base, the company is able to accelerate activity on similar total capital spend year on year. Similar to years past, we currently forecast approximately 75% of our drilling and completion capital will be allocated in the first half of 2025 and trend lower in both the third and fourth quarters of the year. Turning to production, the 2025 plan highlights our transition from delineation to development mode in the Marcellus and includes development targeting the Utica lean condensate acreage recently acquired through our discretionary acreage acquisitions. Notably, this is the first year that the company is completing wells in all five major development areas, inclusive of the Scoop, Utica Dry Gas, Utica Condensate, Utica Lean Condensate, and Marcellus, as noted in the investor deck on slide 11. We forecast approximately 50 percent of the total company turn in lines will be liquids rich weighted during the year. Anticipating liquids production defined as combined oil and NGL production will increase over 30 percent year on year based upon the midpoint of our guidance. and total in the range of 18.0 to 20.5 thousand barrels per day for the full year. In addition, we expect total equivalent production to be relatively flat to full year 2024 with an increasing production profile as we progress throughout the year, positioning the company attractively for an improving commodity environment with further potential opportunities for capital and production efficiency improvements in the future years. In our investor deck on slide 12, we include a more detailed outlook on our expected 2025 capital and production cadence. Shifting to the company's 2024 performance, Gulfport achieved strong financial results for the full year highlighted by our high quality resource base, continued focus on operating efficiencies, and attractive adjusted free cash flow generation. We repurchased approximately 7% of our common shares, outstanding through our ongoing stock repurchase program while maintaining a strong balance sheet and continuing accretive inventory additions in the Utica liquids rich window, adding approximately a year of largely lean condensate inventory. After adjusting for free cash flow utilized for discretionary acreage acquisitions, the company allocated substantially all of our adjusted free cash flow to repurchasing our common stock during 2024. returning 96% of our available adjusted free cash flow to shareholders throughout the year. Turning to specifics, full-year 2024 capital expenditures, excluding discretionary acreage acquisitions, totaled approximately $385 million, and production for the year averaged 1.05 billion cubic feet equivalent per day, both in line with the expectations we set forth with investors at the beginning of the year. The company drilled 21 gross wells, which were predominantly focused in the Utica. On the completion side, Gulfport completed and turned to sales 19 gross wells, which included three scoop wells, 12 Utica dry gas wells, and four Utica condensate wells. Alongside yesterday's earnings announcement, we provided longer-dated production history from our four-well condensate pad in Harrison County, Ohio, and we are very pleased with the continued strong reservoir performance. Referring to slide 15 of the investor deck, under our managed pressure approach and following six months or 180 days of production, the Lake 7 wells are exhibiting a relatively flat production profile with minimal daily pressure drawdown. As we noted on our third quarter call in November, we elected to increase production rates on two of the four wells to determine the optimal production profile for this pad, as well as future nearby development, and concluded additional reservoir productive capacity remains. Moving forward, we have the ability to flow at increased initial production rates, preserving long-term well performance while also maximizing returns. We are currently completing our nearby cage development and look forward to applying our learnings from the lake seven pad to this development, which is expected to come online in late March. In addition, on slide 14 of our investor deck, we provided an update on our Utica dry gas well performance with over 12 months production history. And as you can see, since we enacted the managed pressure approach in early 2023, the development program has continued to exhibit strong results, yielding higher cumulative recoveries per 1,000 foot of lateral after an extended production period. Operationally, we continue to focus on improving efficiency, and on the drilling side, we achieved cycle time improvements in total footage drill per day of over 9% year-on-year and over 55% when compared to year-end 2022. On the completion side, we also continue to see efficiency improvements in the frack and drill-out phases of our operations, improving average frack pumping hours per day by 25% in 2024 and average plugs drilled per day by 46%. Our operating team's high level of efficiency and cost reductions translate into realized savings for our 2025 development program, and we now expect our 2025 Utica per well cost to be below $900 per foot of lateral, or approximately 10% lower than full year 2024. On the discretionary acreage front, the company expanded our acreage footprint by investing $45 million in 2024, largely targeting Utica lean condensate acreage within our Belmont County development footprint. With our current drilling pace, we added over a year of core liquids-rich locations And when coupled with our 2023 efforts and the de-risking of our Marcellus acreage, we have added over four and a half years of high-margin, liquids-rich inventory through delineation and discretionary acreage acquisition efforts. The additional inventory provides durable fundamental value to the company, as well as competitive returns with our existing high-quality inventory, as we highlight on slide 15 of the investor deck. We will continue to monitor opportunities to increase our leasehold footprint to enhance resource debt and believe these opportunities rank very high as we evaluate uses of free cash flow in 2025. In closing, we are proud of the progress and solid foundation the Gulfport team has built and continues to build upon. The company remains focused on continued operational improvements and optimizing our asset development and portfolio allocation in order to maximize free cash flow generation and value for our investors. Now, I will turn the call over to Michael to discuss our financial results.