Gulfport Energy Corp.'s second quarter production dropped by a little more than 1% from the first quarter after it pulled back the reins in the Utica Shale.
The company produced a total of 2.4 million boe, or 26,725 boe/d in the second quarter, down from the 27,087 boe/d in the first quarter. The Utica accounted for 79% of second quarter production, or 1.9 million boe.
Although it has a sizeable patchwork of assets in Southern Louisiana and the Bakken Shale and Niobrara formation, Gulfport has increasingly focused on 179,000 net acres in eastern Ohio. However, shortly after CEO Michael Moore was appointed in April, he said a close review of the company's operations revealed that earlier assumptions used to determine the pace of development in Ohio were too careless (see Shale Daily, April 24).
A decision was made to slash Utica guidance by 30% from 50,000-60,000 boe/d to 37,000-42,000 boe/d in favor of building a backlog of wells to maintain scheduling consistency and cut future costs for crews working to tie them into sales (see Shale Daily, May 8).
On the news, Wells Fargo Securities analyst Gordon Douthat said "to the extent that the Street was hoping that the guidance reduction last quarter would set up for production beats going forward, [this] news could pressure the stock." Third and fourth quarter operations could be "more impactful" to the company's market performance this year, but "the jury is still out in our view."
Gulfport also had said it was hampered in the first quarter by midstream issues in the Utica, with delays in building its dry gas gathering lines, while struggling to optimize the existing system. To alleviate the midstream problems, the company has entered into a letter of intent under a joint development agreement with Rice Energy Inc. to build more gathering pipelines in Belmont County, OH (see Shale Daily, Dec. 17, 2013).
The deal, announced Wednesday, calls for Rice to construct and operate lines in an area of mutual interest to serve Gulfport's production in multiple townships. Another agreement with MarkWest Energy Partners LP would give Gulfport 1 Bcf/d of capacity to pipelines operated by Rockies Express Pipeline LLC (REX) and Texas Eastern Transmission LP. The details were being finalized and in-service dates were not detailed.
The company also has entered into a 20-year firm transportation agreement with REX beginning in 2015 to deliver 175,000 MMBtu/d to Midwest and Gulf Coast markets.