On Thursday, JPMorgan reaffirmed its Overweight rating on Gulfport Energy (OTC:GPORQ) Corporation stock(NYSE: GPOR), following a series of investor meetings in Dallas earlier this week with the company's CEO, John Reinhart, and CFO, Michael Hodges. The meetings highlighted Gulfport Energy's commitment to operational enhancements aimed at improving capital efficiency.
The executives discussed their strategy to achieve further efficiency gains in the South Central Oklahoma Oil Province (SCOOP) and potential incremental improvements in the Utica Shale, especially in drilling operations. They expressed confidence in the company's upcoming Marcellus Shale development, which is expected to commence in early 2025 and may involve multiple drilling pads.
Gulfport Energy's management also noted some deflationary trends, including modest reductions in costs for pressure pumping, rig contracts, and steel. The company has transitioned to ProFrac (ACDC) for its completion services.
Unlike some natural gas peers who have announced reductions in activity or volume curtailments due to low prices, Gulfport does not anticipate making similar adjustments. The company's smaller size, robust hedging strategies, and a planned shift towards wet gas activity in 2024 are expected to maintain stable year-over-year natural gas volumes.
The firm is well-positioned with approximately 60% of its fiscal year 2024 production hedged at an average floor price of around $3.70 per thousand cubic feet (Mcf). JPMorgan estimates that Gulfport will generate $213 million in free cash flow (FCF) in FY24, which represents a 7% FCF yield compared to an average of 3% among its gas-focused peers. The company plans to return the majority of this FCF to shareholders through buybacks, though some funds may be allocated towards strategic acreage acquisitions.
During the meetings, the topic of mergers and acquisitions (M&A) was also discussed, as it remains a significant trend in the exploration and production (E&P) industry. Gulfport Energy's management expressed interest in expanding their operational scale but emphasized the importance of not over-leveraging the company's balance sheet in any potential transactions.
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