Gulfport Energy: Projected $300 Million Free Cash Flow At Current Strip

zhengzaishuru

Gulfport Energy (NYSE:GPOR) announced Q4 2022 net precocious on with guidance for 2023 that was mostly amended than my expectations. It is doing a bully occupation successful presumption of controlling costs and believes that it tin grow accumulation by 2% to 6% successful 2023 with the aforesaid wide capex fund (and a somewhat reduced D&C capex budget) compared to 2022. As well, Gulfport added much hedges implicit the past fewer months erstwhile earthy state prices were overmuch stronger than they are now.

The operation of bully show astir costs and the further hedges means that Gulfport is projected to make $300 cardinal successful affirmative currency travel successful 2023 astatine existent portion of $3.18 NYMEX gas. It besides added 2024 hedges astatine coagulated prices arsenic well.

The beardown outgo show and improved hedging presumption boosts Gulfport's estimated worth to $115 per stock successful a semipermanent $4.00 NYMEX state script and $95 per stock successful a semipermanent $3.50 NYMEX state scenario.

2023 Guidance

Gulfport expects to turn its accumulation by astir 2% to 6% successful 2023 to an mean of 1.0 Bcfe to 1.04 Bcfe per day. This is somewhat little 2023 accumulation than what Gulfport expected astatine the opening of 2022 erstwhile it suggested 5+% accumulation growth successful 2023 from projected 2022 accumulation of astir 1.0 Bcfe per day.

Gulfport provided immoderate beauteous affirmative guidance astir 2023 costs. It expects astir $450 cardinal successful superior expenditures successful 2023, which is akin to its 2022 capex and astir 7% little than what I had modeled for it successful 2023. As well, Gulfport's D&C capex is really expected to spell down 6% successful 2023 arsenic it is spending much connected leasehold and onshore capex to apt much than replenish its inventory.

Gulfport besides noted that it expects minimal (if any) work outgo ostentation successful 2023 and that it expects to trim its per portion operating costs by 7% successful 2023 compared to 2022. The reduced operating costs per portion is chiefly driven by little accumulation taxes owed to weaker projected earthy state prices successful 2023.

Improved Hedges

Gulfport has added immoderate much hedges implicit the past fewer months. It present has hedges connected astir 100% of its 2023 earthy state production, though that includes sold calls that bounds its upside and supply nary downside protection. Gulfport has hedges providing downside extortion connected astir 56% of its 2023 earthy state production.

The changes to Gulfport's 2023 hedges are positive, arsenic it added swaps covering an further 7% of its 2023 earthy state accumulation astatine an mean terms of astir $5.91 per share. It besides modified its 2023 sold calls to rise the mean sold telephone onslaught terms by $0.26.

Gulfport's Hedges (gulfportenergy.com)

Gulfport besides added swaps covering different 16% of its 2024 earthy state accumulation (assuming level to low-single digits accumulation growth) astatine an mean swap terms of $4.47. Gulfport present has hedges covering astir 60% of its 2024 earthy state production, including downside extortion connected astir 39% of its earthy state accumulation with an mean level terms of $3.97.

2023 Results At Strip

Gulfport present expects to mean astir 1.02 Bcfe per time successful accumulation during 2023, with 90% of that accumulation being earthy gas. At existent portion of $3.18 NYMEX gas, Gulfport whitethorn recognize astir $2.90 for its earthy gas.

This leads to a projection that Gulfport volition make $1.315 cardinal successful revenues during 2023, including the effect of its hedges. Gulfport's hedges person astir $73 cardinal successful affirmative worth during 2023, mostly owed to its earthy state swaps. It has swaps covering 25% of its 2023 earthy state accumulation astatine an mean swap terms of $4.28.

This results successful a projection that Gulfport tin make $300 cardinal successful escaped currency travel successful 2023 astatine existent strip. Gulfport estimated that it would make $320 cardinal successful escaped currency travel astatine $3.50 NYMEX gas.

My projections person it getting adjacent to that magnitude astatine $3.18 NYMEX state since lipid is astir $8 higher than the level $70 lipid that Gulfport utilized successful its estimates.

Estimated Valuation

Gulfport's beardown show astir controlling costs and its improved hedging presumption increases my estimated worth for Gulfport to astir $115 per stock successful a semipermanent (post 2023) script with $4.00 NYMEX state and $95 per stock with semipermanent $3.50 NYMEX gas. This besides assumes level $70 WTI lipid successful some scenarios.

Gulfport's superior ratio has been helped by its beardown good performance. It is devoting implicit 80% of its 2023 D&C capex to the Utica Shale. The beneath illustration shows Gulfport's fantabulous Utica good results successful 2021 and 2022 compared to assorted peers.

Gulfport's Utica Wells (gulfportenergy.com)

Conclusion

Gulfport Energy expects to turn accumulation modestly successful 2023 with a akin full capex fund to 2022. It is devoting much of its fund to onshore capex, truthful its D&C capex is really expected to alteration 6% compared to 2022. Gulfport's superior ratio is helped by the beardown show of its caller wells.

With fantabulous outgo power efforts and an improved hedging position, Gulfport is projected to make $300 cardinal successful escaped currency travel successful 2023 astatine existent portion of $3.18 NYMEX gas.

I person accrued my estimation of Gulfport's worth to $95 successful a semipermanent $3.50 NYMEX state situation and $115 successful a semipermanent $4.00 NYMEX state environment.

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