Gulfport Energy Corp. remained focus on its balance sheet during the first quarter and continued leaning on its dry natural gas assets in the Utica Shale to drive production above guidance for the period.
The company cut its lease operating expense by 41% and its midstream gathering and processing expense by 10% year-over-year. Increased efficiencies and further reductions in service costs, meanwhile, allowed it to shave $300,000 off the cost of each well.
"We've attacked every line item, and we've also seen some efficiency gains on our operations both on the frack side and completion and drilling side," said COO Ross Kirtley. "That's something we're attacking daily, we talk about it daily."
Gulfport reported first quarter earnings on Thursday just before Appalachian pure-plays Rice Energy Inc. (see related story) and Eclipse Resources Corp. (see Shale Daily, May 5) hosted their calls. The intense focus for all three operators was cost-cutting, with a theme of positioning for better expected natural gas prices in 2017 underscoring each call.
Gulfport reported first quarter production of 692.2 MMcfe/d, up from the year-ago period when it produced 424.4 MMcfe/d and up from 4Q2015 when it produced 643.8 MMcfe/d. First quarter production beat the company's guidance for the period of 670-685 MMcfe/d.
Gulfport didn't run a completion crew during the first quarter, but instead entered the period with a backlog of 15 gross drilled and completed dry gas wells from its 2015 program, which were all turned to sales by March 31. A Rice Energy affiliate also finished a lateral during the quarter that connects Gulfport's two existing dry gas gathering systems in Ohio, allowing it to end voluntarily curtailments and get more gas flowing. The companies formed a midstream joint venture last year (see Shale Daily, Oct. 8, 2015)
With the fall in oil and natural gas liquids prices, Gulfport highlighted a plan earlier this year to focus entirely on its east and central dry gas windows in Ohio's Monroe, Belmont and Jefferson counties (see Shale Daily, Feb. 18). CEO Michael Moore said at current strip prices, the company assumes wellhead returns in those areas of more than 40%.
Gulfport has since brought back a completion crew to execute its 2016 activity and is guiding for flat production in the second quarter of 664-692 MMcfe/d. Full-year volumes are still expected to reach up to 730 MMcfe/d -- a big increase from last year's production of 548.2 MMcfe/d.
Gulfport's first quarter production consisted of 85% natural gas. The Utica Shale continued to drive the company's volumes, accounting for 670.7 MMcfe/d, while its legacy assets on the Gulf Coast churned out 20.6 MMcfe/d.
The operational gains and cost-cutting, however, were not enough to offset low commodity prices. Including hedges, Gulfport earned $2.61/Mcfe for its production, compared to $3.79/Mcfe in 1Q2015. Revenue was down to $157 million from $176.3 million in the year-ago period.
The company reported a net loss of $242.3 million (minus $2.17/share), compared to net income of $25.5 million (30 cents/share) at the same time last year. The loss included a $219 million impairment of the company's oil and gas properties; a $23.1 million loss related to the company's 25% ownership interest in Grizzly Oil Sands ULC; and a $7.7 million non-cash derivative loss, among other things.