Gulfport 3Q18 Operations Update: 11 New Utica Wells

Gulfport Energy, an independent oil and gas driller with significant acreage positions in the Utica Shale of eastern Ohio and the SCOOP Woodford and SCOOP Springer plays in Oklahoma, issued its third quarter operational (not financial) update yesterday. Gulfport is one of those companies that delivers its operational news first, and a few weeks later issues its financial news. Gulfport reports production continued to climb to new highs, averaging 1,427.5 million cubic feet equivalent (MMcfe) per day, a 7% increase over 2Q18 and 19% increase over 3Q17. Said another way, 1.43 Bcf/d.
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By the Numbers – Revenue & Profitability for M-U Drillers

The expert analysts at RBN Energy have just published their “fourth and final” in a series of posts looking in detail at E&Ps (exploration & production companies, or “drillers”). One of the groups of E&Ps they examine are “gas-weighted” E&Ps–or drillers who mostly extract natural gas. In looking through the list, you immediately realize every one of them has operations in the Marcellus and/or Utica Shale region. Yes, a few also have operations in other plays, but they all have at least some operations here. The real value in the article is an accompanying spreadsheet comparing various financial metrics (apples to apples)–things like total revenue, lifting costs, production costs, and “pre-tax income,” meaning profitability. How do our drillers compare with each other?
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3 Counties, 5 Drillers Led OH’s 50% Increase in 2Q Gas Production

The Pareto Principle is alive and well in the Buckeye State. You may know it as the 80/20 rule, or in this case, the 75/25 rule. The rule that states roughly 80% of the results come from 20% of the effort. Last week MDN brought you the latest update from the Ohio Dept. of Natural Resources–their second quarter 2018 report showing all production coming from the Ohio Utica Shale (see Top 25 Producing Gas & Oil Wells in Ohio Utica for 2Q18). While MDN provided you with Top 25 lists showing the best-performing wells (both gas and oil) during 2Q, and while we provided you with a better spreadsheet to view the information than that provided by the ODNR itself, our analysis was basic and high level. Utica natgas production was up a big 42% over the same period last year, and Utica oil production was up 11%–a cumulative 50% increase when you convert it all into equivalents. The experts at S&P Global Platts have done a deep dive into the numbers and have found that three counties represent 75% of all production in 2Q18, and five drillers represent 75% of all production in 2Q18. Which counties and which drillers? Read on…
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Gulfport Energy 2Q18: 970 MMcfe/d in Utica; Drilled 9 Ohio Wells

Gulfport Energy, an independent oil and gas driller with significant acreage positions in the Utica Shale of eastern Ohio and the SCOOP Woodford and SCOOP Springer plays in Oklahoma, issued its second quarter update yesterday. The company made $111 million in profit (net income) in 2Q18, vs. making $106 million in 2Q17. They produced an average of 1.33 billion cubic feet equivalent per day (Bcfe/d) across all of the plays where they are active. Of that, the vast majority of production (73%) came from the Ohio Utica Shale, which was 970 million cubic feet equivalent per day (MMcfe/d). During Q2, Gulfport drilled nine Utica wells, giving it a total of 21 Utica wells drilled so far this year (out of 35 planned for 2018). They operate two rigs in the OH Utica currently. Here’s the complete update from Gulfport…
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Financial Checkup for Marcellus/Utica Drillers

RBN Energy, headed by founder Rusty Braziel (co-founder of Bentek Energy), is, in our opinion, the premier oil and gas analytics firm out there. Smart people working at RBN. And they offer up some amazing content on their blog site–for free! At least it’s free for a while, then it goes behind a paywall. A few days ago RBN published a blog post on the financial health for the 44 major publicly-traded U.S. exploration and production companies (drillers). RBN groups them into three categories: Oil-Weighted, Diversified, and Gas-Weighted. We found the Gas-Weighted list of 10 companies and the information revealed about them to be fascinating and worth studying. Each of the companies has major operations in the Marcellus/Utica–some of them totally focused on our region. Among the data points shared: revenue, production costs, lifting costs and more. We think of the following as a handy financial health scorecard/checkup for 10 of the biggest drillers in the M-U, including Antero Resources, Cabot Oil & Gas, Chesapeake Energy, CNX Resources, EQT, Gulfport Energy, National Fuel Gas (Seneca Resources), Range Resources, Southwestern Energy, and Ultra Petroleum…
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Gulfport Energy 1Q18: “We Love SCOOP” but Spends 70% on Utica

In April Gulfport Energy released an initial look at the company’s first quarter operations (see Gulfport 1Q18 Update: Utica Production Up 37%, SCOOP Up 198%). The April operational update did not include financial performance. Gulfport is an “independent” oil and gas driller with significant acreage positions in the Utica Shale of eastern Ohio and the SCOOP Woodford and SCOOP Springer plays in Oklahoma. Yesterday Gulfport dropped the other shoe–the financial report for 1Q18. The company reported $90 million of net income for 1Q18 vs. $154 million in 1Q17–a 42% drop. Much of the update focused on Gulfport’s activity in the Oklahoma SCOOP, which seems to have turned Gulfport’s head. However, there is continued strong activity in the Ohio Utica. Gulfport reports drilling 13 wells in the Utica in 1Q18 with an average lateral length of 9,000 feet (11% longer than 2017’s laterals). They averaged just over 1 billion cubic feet per day (Bcf/d) of production in the Utica. And Gulfport CEO Michael Moore said on an analyst conference call, in response to a question, that the company is still spending 70% of its capital budget on Utica drilling in 2018…
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EQT Midstream Consolidates, Buys Gulfport JV Share for $175M

As EQT gets ready to split the company into two companies later this year, the midstream (pipeline & processing plants) portion of the company yesterday announced a complicated “drop down” deal to streamline the midstream operation. The short version is this: EQT has midstream assets spread throughout three companies on paper–EQT Midstream Partners, EQT GP Holdings, and Rice Midstream Partners. Yesterday the company announced all three are being merged under one umbrella–EQT Midstream Partners. As you’ll read in the EQT announcement, the entire deal is complex–with various entities buying assets from the others. One of the more interesting aspects of the deal is that EQT Midstream is buying EQT’s (the driller’s) Olympus Gathering System and EQT’s 75% interest in the Strike Force Gathering System. EQT Midstream is also buying out Gulfport Energy’s 25% interest in Strike Force, meaning EQT Midstream will now own 100% of Strike Force–a gathering pipeline system in the dry gas Utica covering 98,000 acres in Belmont and Monroe counties, in Ohio. Here’s the news that EQT is getting its midstream ducks in a row…
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Gulfport 1Q18 Update: Utica Production Up 37%, SCOOP Up 198%

Yesterday Gulfport Energy released an initial look at the company’s first quarter operations (full copy below). The update does not include financial performance–only operational performance. Gulfport is an “independent” oil and gas driller with significant acreage positions in the Utica Shale of eastern Ohio and the SCOOP Woodford and SCOOP Springer plays in Oklahoma. Gulfport also owns acreage along the Louisiana Gulf Coast. Our primary interest is in Gulfport is their Ohio Utica Shale program. In 1Q18, when you role everything together (methane, NGLs and oil) converting it all to natural gas “equivalent,” Gulfport produced 92,772 million cubic feet equivalent (MMcfe), versus producing 67,559 MMcfe in 1Q17–a 37% increase year over year. However, what you can’t ignore in this update is that Gulfport has really turned up the activity in the Oklahoma SCOOP. In 1Q18 Gulfport brought online 3 Utica wells, but 7 SCOOP wells. In 1Q18 Gulfport produced 22,103 MMcfe in the SCOOP, versus producing just 7,398 MMcfe in the SCOOP a year ago in 1Q17–a 198% increase. The conclusion is inescapable: the SCOOP is ascending for Gulfport, occupying the company’s time, attention and money…
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Gulfport Energy: Utica Provides “Reliable, Repeatable Growth”

Gulfport Energy is among a number of companies we’re highlighting today that, earlier this week, delivered their 4Q17/full 2017 update. Gulfport is an “independent” oil and gas driller with significant acreage positions in the Utica Shale of eastern Ohio and the SCOOP Woodford and SCOOP Springer plays in Oklahoma. Gulfport also owns acreage along the Louisiana Gulf Coast. Although Gulfport drills (we’d call it “dabbles”) elsewhere, make no mistake–the Utica Shale is the company’s main focus. During 2017, Gulfport spud (drilled or began to drill) 94 Utica wells. Gulfport turned-to-sales 68 Utica wells in 2017. The Utica wells drilled last year had an average lateral length of approximately 8,150 feet. It took Gulfport an average of 19.2 days to drill a well, a decrease of 16% over the time it took to drill wells in 2016. Gulfport currently runs three drilling rigs in the Ohio Utica, with plans to decrease that number down to two in March, when the contract expires for one of the rigs. So what about 2018? As you can imagine, running one less rig means drilling less wells in 2018. Gulfport is budgeted to drill 36 to 40 Utica wells with an average lateral length of 11,200 feet this year. They plan to turn-to-sales 33 to 37 wells with an average lateral length of 8,000 feet. Gulfport made a profit of $435.2 million last year, versus losing $979.7 million in 2016 (a $1.5 billion swing into the black). According to CEO Michael Moore, “Our Utica asset provided reliable, repeatable growth throughout the year.” Here’s the full reliable, repeatable Gulfport update…
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Clash of the Titans: PA Marcellus Gas Competes with TX Permian

Last week MDN editor Jim Willis attended Hart Energy’s Marcellus-Utica Midstream conference in Pittsburgh (a series of stories are coming this week from that event). One of the stray comments Jim heard at the event was this: The chief rival or competitor to the Marcellus with respect to natural gas production is not, as you might assume (we sure did) the Haynesville Shale in Louisiana. No. The chief competitor, producing more and more volumes of natgas, is…the Permian! That’s right, an oil play! Why? When you drill for oil, you get other hydrocarbons out of the ground along with the oil. Primarily methane, or natural gas. It’s called “associated gas.” Even though most of what comes out of a Permian well is oil and not gas, because there are so darned many oil wells in the Permian (with more being drilled all the time), the total volume of gas coming from the Permian is going up, dramatically. The problem is, some Marcellus/Utica gas heads to the Gulf Coast to be used by petrochemical companies or to be exported. However, gas produced right there in the region is less expensive to get to market (shorter distance), so that Permian-sourced gas is competing, and increasingly crowding out, Marcellus/Utica gas. Investors have noticed and have, in a sense, “punished” some of the biggest of the big Marcellus/Utica producers by selling their shares, leading to a loss in share value. Among the hardest hit have been Southwestern Energy, Gulfport Energy, and Range Resources. The stock price for those three companies is down, since Jan. 1st, 33%, 30% and 25% respectively. A Bloomberg article says the stocks for those companies have been “mauled.” Indeed. Here’s some insight into how the Marcellus/Utica is increasingly going up against the oil giant Permian Basin, sometimes getting mauled…
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Gulfport Energy Continues Focus on Utica in 2018, No Borrowing

On Monday Gulfport Energy (drills mainly in the Utica but also in Oklahoma and Louisiana) issued it’s fourth quarter and full year 2017 results, along with a preview of what they expect to do in 2018. Gulfport has drilled the second highest number of Utica wells in Ohio, second only to Chesapeake Energy. Gulfport’s production in 4Q17 averaged 1.26 billion cubic feet per day equivalent, up 5% from 3Q17 and up a whopping 61% from 4Q16. Gulfport brought 15 Utica wells online in 4Q17. What’s ahead in 2018? The company will spend $770-$835 million in 2018. Astonishingly, Gulfport will not borrow to spend that kind of cash! Their spending will be 100% funded by the cash flow they generate from selling gas and oil and NGLs. Gulfport figures production will average somewhere around 15-19% more in 2018 than in 2017. Using an “average of 2.5 rigs” (how does that work?), Gulfport will drill 36-40 new Utica wells this year with an average lateral length of 11,200 feet. Gulfport plans to bring online 33-37 Utica wells with an average lateral length of 8,000 feet. Here’s the update of what happened in 2017, and what to expect in 2018, for one of the most important players in the Ohio Utica…
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Impressive 2018 Marcellus Growth Not So Impressive Because of DUCs?

Our lead story today is about Gulfport Energy which highlights some exciting news: This year (in 2018) Gulfport will fund their entire drilling budget out of the cash flow the company generates from selling gas/oil/NGLs (see Gulfport Energy Continues Focus on Utica for 2018, No Borrowing). Thing is, Gulfport isn’t the only Marcellus/Utica driller to advertise the fact that this year they are “living within their means” and not borrowing. Others include Range Resources, EQT and Antero Resources. Wow! We’re finally profitable!! Or are we? MDN spotted some analysis by a hedge fund manager. Writing on the Seeking Alpha investor’s website, Josh Young says (in our words) “hold on a minute” with respect to M-U drillers appearing to be able to grow production without borrowing. Why is Josh not convinced with this good news? Because when you dig deeper into the numbers, you find that “organic growth within cash flow is further from reach” because drillers are using DUCs to spend less on drilling, and grow production, than they otherwise would be. A DUC is a Drilled but UnCompleted well. Many times drillers will drill the initial hole in the ground, but then not “complete” (or frack) the well. Why do that? For a variety of reasons. The biggest reason is usually because the commodity price of gas (or oil, depending on the well) is not favorable. Rather than lose the lease (an expensive proposition), drillers will begin the process by drilling, and then leaving, the well, returning later to complete it when prices go up again. Josh’s thesis is that by using DUC inventory drillers aren’t really funding the entire budget from current year cash flow, because some of the money was spent in a previous year to drill the well. They are, in essence, still borrowing–from a different year. Josh estimates an average of 20% of the “new” wells coming online are DUCs and not truly new wells funded by current year dollars–meaning these companies aren’t as “profitable” as they may seem. Does he have a point? Is it all just financial mumbo jumbo? You decide…
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Gulfport 3Q17: Production Up Whopping 63%, Turns a Profit

Gulfport Energy, which has drilled the second-highest number of Utica wells in Ohio (331 so far, second only to Chesapeake Energy), issued their full third quarter 2017 update earlier this week. Gulfport, which drills mainly in the Utica (but also in Oklahoma and Louisiana), reported 3Q17 production was up an astonishing 63% over the same period last year, and up 16% from 2Q17. Gulfport produced an average of 1.2 billion cubic feet per day (Bcf/d) of natural gas equivalent in 3Q17. The vast majority of that production (82% of it) came from the Ohio Utica. You can safely say Gulfport has broken into the 1 Bcf/d Club in the Ohio Utica! On the financial front, the company swung into profitability during 3Q17 by making $18.2 million in profit, versus losing $157.3 million in the same quarter last year. The company has four rigs operating in the Utica, and they drilled 23 Utica wells in 3Q17. Below is the full 3Q17 update, excerpts from the analyst call, and the latest slide deck…
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M-U’s Biggest Drillers Increase NGL Production for Extra Money

When a driller sinks a hole in the ground looking for one hydrocarbon–like natural gas–other hydrocarbons also come out of the ground. Sometimes its oil. Sometimes condensate. Sometimes natural gas liquids (NGLs), including ethane, propane, butane, pentane, etc. In northeast and central Pennsylvania where the Marcellus Shale is prolific, most of what comes out of the ground is just methane–or natural gas. However, in the southwestern portion of PA, and in the northern panhandle of WV and on into eastern OH, it’s a different story. They are considered “wet gas” areas because (depending on the county) the wells are prolific NGL producers. Most NGLs, like propane, fetch much higher prices than plain old methane. Typically ethane is the NGL that mostly comes out of the ground, but for many drillers ethane can’t (yet) be sold, so it’s considered a “waste” product, mixed into the methane stream to get rid of it. But that’s changing. There are now pipelines to carry ethane to facilities in both Philadelphia and to a cracker plant in Canada. There’s even a pipeline for ethane (and other NGLs) that goes all the way to the Gulf Coast (ATEX, Appalachia to Texas). Some of the largest Marcellus/Utica drillers now have markets for their NGLs, so they are ramping up production and selling more NGLs. In fact, six of the eight largest M-U drillers increased their NGL production in the second quarter of 2017 compared to 2Q16. Which six increased, and which two decreased NGL production last quarter?…
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Gulfport Energy 2Q17: $106M Profit, Drills Northern Utica Well

Gulfport Energy, which is the second most active driller in the Ohio Utica, behind Chesapeake Energy, has (so far) drilled 303 Utica wells and owns 211,000 acres of leases in the Buckeye State. Gulfport, which drills mainly in the Utica (but also the SCOOP, in Oklahoma) reported their second quarter 2017 production numbers on July 31 (see Gulfport 2Q17: Most Active Utica Quarter Ever, 29 Wells Added). As we pointed out, they separate their production update from their financial update. On Tuesday the company turned in its financial report for 2Q17. The company done good–real good. A year ago, in 2Q16, Gulfport lost $340 million. This year, in 2Q17, Gulfport made $106 million in profit. Quite a turnaround–almost half a billion dollar swing in one year! On a conference call, Gulfport CEO Mike Moore mentioned they drilled their first Utica well in Jefferson County, OH–“our farthest northern well drilled to date.” Below are comments from this week’s conference call, along with a full 2Q17 update–production & financial…
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Gulfport 2Q17: Most Active Utica Quarter Ever, 29 Wells Added

Yesterday Gulfport Energy released the company’s second quarter 2017 operational (not financial) update. Gulfport is one of those companies that teases by separating the two. Normally we’d wait and report both together, but there is some interesting news coming from the operational side. Gulfport, which drills mainly in the Utica (but also the SCOOP, in Oklahoma) reports production is through the roof, mainly due to bringing online 29 new Utica wells during 2Q17. Gulfport said in a statement that 2Q17 for the Utica Shale was “the most active quarter from a tie-in line perspective the Company has experienced since entering the play in 2011.” Meaning some (many?) of the wells were already drilled, but they all got completed and hooked up to production in 2Q17. When you add all of Gulfport’s production together across the Utica (the majority) and the SCOOP and tiny bit in Louisiana, the company joined the 1 billion cubic feet per day (Bcf/d) club in 2Q17. If you look only at Utica production, Gulfport averaged 867 million cubic feet (MMcf) per day of production, which is getting close to the 1 Bcf mark–in just the Utica. That is a massive amount of production in the Utica…
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