Large-scale dealmaking for Gulfport Energy is uncertain now, according to a securities analyst and management comment in an Aug. 6 investor call.
That was a shift from May’s earnings report when President and CEO John Reinhart alerted investors that M&A could be one use of its free cash flow this year.
On Aug. 6, however, Reinhart focused on Gulfport’s $7 million of land acquisitions in the Utica Shale in Ohio and the company’s plans to bolt on up to $100 million total of acreage this year.
An analyst with Tudor, Pickering & Holt said, “In the past, you guys have talked about a willingness to pursue more transformative opportunities.
“I hate to call $75- to $100 million small-scale, but is there an implication here that much larger-scale opportunities are unavailable or more unlikely?”
Reinhart only said, “What I'll say is we've been pretty consistent, at least since [my own, the CFO and the COO’s] arrival [in 2023], that we’re going to protect the balance sheet, keep leverage low, increase efficiencies, lower cost and buy shares with the free cash flow and reinvest into the company with additional inventory ....
“So we're very pleased with the prospects we have out there with this organic acquisition program.”
At the time of Reinhart’s comment in early May, the Ohio operators in play were Encino Energy and Ascent Resources. The latter reported in March that it was considering an IPO.
Later in May, though, EOG Resources bid $5.6 billion in cash for Encino in a deal that closed Aug. 1.
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A securities analyst told Hart Energy after the Aug. 6 call that Gulfport holds aces at the M&A table right now.
“They've been doing great and I don't think they want to sell or need to sell,” he said. He asked to not be identified.
“I think they are actually kind of growing the value of the company. They talked about adding over six years of inventory since 2023 with these small acquisitions,” he said.
Gulfport reported that the small acreage deals planned this year could add two more years to inventory.
The operator has 4 Bcfe of proved reserves—roughly half undeveloped.
In the second quarter, it produced 1 Bcf/d and 19,200 bbl/d of oil and NGL from the Appalachian and Anadarko basins.
Of the total, 736 MMcf/d and 10,700 bbl/d were from the Utica and Marcellus; the balance, from Oklahoma.
The stock, which was about $173 during the call, reached an all-time high of $210 in June since the E&P emerged from bankruptcy in May 2021.
So far this year, it bought back 680,000 shares at an average of $125/share through June.
Common shares outstanding total 17.8 million. Market cap is $3 billion; long-term debt, $695 million.
Silver Point Capital owns 15% of the common; Wellington Management, 6.6%; and FMR LLC, 6%, according to a Gulfport filing with the Securities and Exchange Commission in April. Gulfport also has preferred shares outstanding, primarily held by Silver Point.
The acreage bolt-ons are focused on Belmont and Monroe counties, Ohio.
The analyst who spoke to Hart Energy said, “I think you're not going to do this repurchase game forever.
“I think as we get into 2026 and 2027, you'll have these questions. But I don't know if they're a company that wants to sell themselves right now.”
The Gulfport board brought on Reinhart, a new CFO and a new COO in 2023.
“It was sort of this zombie stock that everyone thought was going to go away, but then they brought in this management team,” the analyst said.