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Ohio Utica Shale

Gulfport pleased with first dry gas well in Ohio's Utica shale

By Bob Downing Published: November 5, 2013

From Gulfport Energy Corp. today:

OKLAHOMA CITY, Nov. 5, 2013 (GLOBE NEWSWIRE) -- Gulfport Energy Corporation (Nasdaq:GPOR) today reported financial and operating results for the third quarter of 2013 and provided an update on its 2013 activities and its planned 2014 activities.

Financial and Operational Highlights

  • Produced oil and natural gas sales volumes of 1,193,808 barrels of oil equivalent ("BOE"), or 12,976 barrels of oil equivalent per day ("BOEPD"), in the third quarter of 2013, as compared to 655,437 BOE, or 7,124 BOEPD in the third quarter of 2012 and 815,300 BOE, or 8,959 BOEPD in the second quarter of 2013.
  • Recorded net income of $40.5 million, or $0.52 per share, in the third quarter of 2013, as compared to $0.5 million, or $0.01 per share, in the third quarter of 2012.
  • Reported adjusted net income of $11.1 million, or $0.14 per share, in the third quarter of 2013.
  • Generated $97.4 million of EBITDA in the third quarter of 2013, as compared to $42.6 million in the third quarter of 2012.
  • Reduced unit lease operating expense for the third quarter of 2013 to $6.11 per BOE, as compared to $10.13 in the third quarter of 2012.
  • Gulfport's first dry gas well in the Utica, the Irons 1-4H well, was recently placed on production in the Utica Shale at an average 24-hour sales rate of 30.3 MMCF of natural gas per day.
  • Nine rigs are currently active in Gulfport's three core operating areas, with seven horizontal rigs in the Utica, one rig drilling at Hackberry and one rig drilling at WCBB.

James Palm, Chief Executive Officer, commented, "We are very pleased with the initial results from our Irons 1-4H well, our first well in the dry gas corridor in the Utica. With approximately 44% of our acreage located within the dry gas phase of the play, this well stands to unlock meaningful value across a large portion of our acreage. The strong economics of this well appear to be very attractive in today's commodity price environments and we look forward to drilling a number of wells in the surrounding area during 2014."

Financial Results

For the third quarter of 2013, Gulfport reported net income of $40.5 million on oil and natural gas revenues of $68.8 million, or $0.52 per diluted share. EBITDA (as defined below) for the third quarter of 2013 was $97.4 million and cash flow from operating activities before changes in operating assets and liabilities (as defined below) was $51.6 million.

Gulfport's 2013 third quarter financial results include a non-cash loss of $6.7 million due to a hedge ineffectiveness. Excluding the impact of hedge ineffectiveness, oil and natural gas revenues for the third quarter of 2013 would have been $75.5 million. Gulfport's 2013 third quarter financial results also include an aggregate gain of $52.9 million in connection with Gulfport's equity interest in Diamondback Energy, Inc. ("Diamondback"), a NASDAQ Global Select Market listed company. Associated with this taxable income was $6.6 million of income tax expense. Excluding the effects of these items, adjusted net income for the third quarter of 2013 would have been $11.1 million, or $0.14 per diluted share.

Production

For the third quarter of 2013, net production was 590,187 barrels of oil, 2,981,632 thousand cubic feet ("MCF") of natural gas and 4,480,667 gallons of natural gas liquids ("NGL"), or 1,193,808 BOE. Net production for the third quarter of 2013 by region was 662,333 BOE in the Utica Shale, 351,171 BOE at West Cote Blanche Bay, 167,520 BOE at Hackberry and an aggregate of 12,784 BOE in the Bakken, Niobrara and other areas.

Realized prices for the third quarter of 2013, which includes transportation costs, were $89.75 per barrel of oil, $3.61 per MCF of natural gas and $1.14 per gallon of NGL, for a total equivalent price of $57.65 per BOE. Realized price for oil in the third quarter of 2013 reflects the impact of fixed price contracts for approximately 5,000 barrels of oil per day at a weighted average price of $99.86 before transportation costs and differentials.

 

GULFPORT ENERGY CORPORATION
PRODUCTION SCHEDULE
(Unaudited)
         
Production Volumes: (1) 3Q2013 3Q2012 YTD 2013 YTD 2012
         
Oil (MBbls) 590.2 579.3 1,642.3 1,782.8
Natural Gas (MMcf) 2,981.6 314.7 4,716.1 741.5
NGL (MGal) 4,480.7 995.5 6,565.2 2,424.4
Oil equivalents (MBOE) 1,193.8 655.4 2,584.7 1,964.1
         
Average Realized Price:        
         
Oil (per Bbl) $89.75 $101.17 $101.72 $105.25
Natural Gas (per Mcf) $3.61 $3.09 $4.03 $2.87
NGL (per Gal) $1.14 $0.88 $1.19 $0.98
Oil equivalents (BOE) $57.65 $92.24 $75.02 $97.82
         
(1) Gulfport's production during the third quarter of 2012 includes 69,202 barrels of oil, 108,678 MCF of natural gas and 988,291 gallons of NGLs, or 110,846 BOEs attributable to its oil and natural gas assets in the Permian Basin. In October 2012, Gulfport contributed these assets to Diamondback. As a result, no Permian Basin production is included in Gulfport's production volumes during the third quarter of 2013.

Subsequent to the third quarter of 2013, net production for the month of October averaged approximately 15,543 BOEPD.

Bank Redetermination

In connection with the fall redetermination of Gulfport's revolving credit facility, Gulfport's lead lender has proposed to increase Gulfport's borrowing base from $50 million to $150 million, subject to the approval of the additional banks within the syndicate.

Derivatives

The table below sets forth the company's hedging positions as of November 5, 2013.

 

GULFPORT ENERGY CORPORATION
COMMODITY DERIVATIVES - HEDGE POSITION AS OF NOVEMBER 5, 2013
(Unaudited)
       
  4Q2013      
Oil (MBbls):        
Swap Contracts        
Volume 460      
Price $ 99.86      
         
Natural Gas (MMcf):        
Swap Contracts        
Volume 920      
Price $ 4.00      
         
  Year Ending  
  2014 2015 2016  
Oil (MBbls):        
Swap Contracts        
Volume 910 -- --  
Price $ 102.79 -- --  
         
Natural Gas (MMcf):        
Swap Contracts        
Volume 18,250 16,425 5,145  
Price $ 4.06 $ 4.06 $ 4.06  
         
Swaption Contracts        
Volume -- 3,650 1,210  
Price -- $ 4.27 $ 4.27  

Operational Update

Utica Shale

In the Utica, Gulfport recently began flowing into sales pipelines its first dry gas well, the Irons 1-4H, in the Utica Shale. The Irons 1-4H was drilled to a true vertical depth of 9,770 feet with a 6,629 foot horizontal lateral. The well was placed on production at an average gross 24-hour sales rate of 30.3 MMCF per day of natural gas. Based upon composition analysis, the gas being produced is 1,072 BTU gas.

Gulfport spud 14 gross (10.05 net) wells during the third quarter of 2013. At the end of the third quarter, Gulfport had seven gross wells waiting on completion and seven gross wells being drilled. At present, Gulfport has seven horizontal rigs drilling on the 39th through 45th gross wells of 2013 in the play. During 2014, Gulfport has budgeted $594 million to $634 million to drill approximately 85 to 95 gross (64 to 71 net) wells in the Utica.

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Stop Fracking Ohio.

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Concerned Citizens of Medina County, a grass-roots group.

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Fracking: Gas Drilling's Environmental Threat by ProPublica, an online journalism site.

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Allegheny Front, environmental public radio for Western Pennsylvania.