GPOR : NASDAQ : US$65.59
Gulfport Energy Resources is an Oklahoma City, OK, headquartered E&P with core producing assets in the Utica shale and Louisiana Gulf Coast (West Coast Blanche Bay and Hackberry fields). Gulfport also has equity interests in Diamondback Energy (Permian Basin), Grizzly (Alberta Oil Sands) and Tatex II & III (Phu Horm gas field in Thailand). GPOR has additional acreage in the
Bakken and Niobrara.
All amounts in US$ unless otherwise noted.
Execution hiccups expected in early stage of play
GPOR presented at Canaccord Global Resources Conference on Oct. 17, the day after it provided Q3 actual prod and an exit rate for YE13. GPOR’s Q3 prod at ~13mboepd beat its earlier guidance due to midstream improvements that caused some recent wells to come online earlier than expected.
After the Q3 update, GPOR’s stock has fallen ~3.5% due to a reduced expected exit rate (27-32mboepd). Notably, the exit rate has been lowered due to ~10 wells that will be hooked in early Jan. ‘14 instead of by YE13. A loss of mud circulation in the vertical section between the surface casing and the “heel” caused GPOR to install intermediate casing in these wells. GPOR felt it could avoid the casing in the majority of its wells and save $1mm/well. Instead, now it will run a “formation integrity test” on each well by pumping high-pressure water and checking for any loss in circulation.
GPOR expects to case half of its wells going forward. With the delay, we model 27mboepd for Q4/13 and 14mboepd FY13. On another note, Q3 prod showed a higher yield of gas (vs. NGLs), but with cryogenic facilities coming online soon, we will
expect NGL yield to improve.
With prod updated, focus shifts to dry das activity GPOR also disclosed that it picked up 9,000 gross acres, mostly in the
dry gas window. In our discussions, the acreage was acquired at $7,000/acre, which could be a highly accretive deal given the big wells expected from the area and 100% of dry gas hedged at ~$4/mcfe. Now focus turns to the Irons well; we expect very early rates on the call.
Positives balance negatives
We model Utica on the basis of GPOR’s acreage in the oil/ wet gas/ condensate/dry gas windows. Upside to the recent deal is balanced by completion delays and lower WI next year. We maintain OUR price target, but consider recent weakness as a strong buying opportunity.