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Gulfport Adds to Utica; Signs with BP to Send Gas to 'Numerous Hubs'

Gulfport Energy Corp. announced a series of moves on Thursday aimed at tightening its balance sheet, improving sales, growing oil and gas revenues and adding to its growing reserves in Ohio's Utica Shale play.

Production and reserves were up, the company said in its 4Q2013 earnings report, announcing yet another acquisition in the Utica, a major marketing deal with BP North America Gas & Power in the Appalachian Basin and hinting at the possibility of an initial public offering (IPO) for its oilfield services assets.

Gulfport said Thursday it had entered into a "comprehensive marketing services agreement with BP North America," securing flow assurance for its gas to numerous pricing hubs. The move was welcomed by financial analysts after Gulfport said derivatives cost it a $16.9 million noncash loss in 4Q2013.

Although the company increased both its full-year and 4Q2013 profits, its margins were squeezed late in the year by lower basis differentials in the northeast and higher general and administrative costs, among other things.

Full-year production was 4.1 million boe in 2013, up from 2.5 million boe in 2012. Gulfport also said its proved reserves increased by 177% over 2012 to reach 38.4 million boe at the end of last year.

Although Gulfport has operations in the Canadian oilsands and the West Coast Blanche Bay and Hackberry fields in southern Louisiana, the Utica Shale comprises 84% of its total proved reserves.

Since November, Gulfport has added 18,080 net acres in Ohio. On Thursday, the company said it entered into a letter of intent with Rhino Resources Partners LP to acquire 8,200 net acres in eastern Ohio for $185 million that would add 1,000 boe/d to its production profile.  The acquisition brings its net Utica position to 165,430 acres and shores up its place as one of the play's top operators.

Gulfport reported a full-year profit of $153.2 million ($1.97/share), up from $68.4 million ($1.21/share) in 2012. In 4Q2013 net income was $24.3 million (30 cents/share), and although that was up from $15.9 million (28 cents/share) in 4Q2012, the company still missed the Street's earnings per share estimate by 13 cents on squeezed margins and lower than expected year-end production.

"Gulfport has some ground to make up to hit its 1Q2014 and 2Q2014 production guidance, but it has the horses to do it," wrote Jason Wangler, an analyst at Wunderlich Securities, in a note to clients. "Gulfport still remains a best idea, given its industry-leading Utica positions, strong production growth and solid balance sheet that could unlock more value in 2014 through divestitures."

The company also said Thursday that it was "evaluating alternatives with respect to certain oilfield service entities in which Gulfport owns an interest," adding only that it might choose to pursue an IPO for those interests sometime later this year.

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