Gulfport Energy Corp. will begin shifting capital this year from the Utica Shale in Ohio to the South Central Oklahoma Oil Province (SCOOP), where its liquids-rich assets should earn it better returns as the near-term outlook for natural gas prices remains dim, management said Thursday.

Gulfport has long been a mainstay in the Utica, which has accounted for the bulk of its production and about 70% of its capital last year. CEO David Wood, who led his first earnings call on Thursday since being named to run the company in December, said that strategy would change.

Gulfport plans to spend about half of its capital expenditures in the Midcontinent this year and the other half in the Utica. In 2020, he said, the company would dedicate more money to the SCOOP.

“One of the advantages of moving capital into the SCOOP is the higher liquids component there,” Wood said of the spending plans over the next two years. “Here, we’re making a concerted effort to move capital at this price deck from Ohio to emphasize more in the SCOOP. That’s not to say it’s always going to be that way, but I think moving in that direction makes sense.”

Given the outlook for gas prices, Gulfport announced last month a 2019 budget of $565-600 million, well below the $815 milion in 2018. The company is guiding for 1.360-1.400 Bcfe/d of production this year, roughly flat with its 4Q2018 average.

The company plans to run one rig in the Utica and has budgeted to drill 10-11 net wells. It also plans to bring between 40 and 45 net Utica wells online. In the SCOOP, Gulfport plans to run 1.5 operated rigs, while it’s budgeted to drill seven to eight net wells and turn to sales another 14-15 net wells. Spending on both plays this year will be similar as Gulfport plans to bring more drilled but uncompleted wells online in the Midcontinent.

Wood said the company’s drilling is “getting better, faster and cheaper” in the SCOOP since it entered the play in early 2017. He stressed, however, that the Utica remains an important part of the portfolio.

"The contrast between the two, if you think about it, is the SCOOP wells are more expensive and take longer, and then they have slightly better returns than the Utica does, but we can have very attractive wells still, and have a great inventory in the Utica. So, it's certainly something that I would not dismiss at all,” Wood said of the Ohio properties. “We regard it as a very valuable and core asset to us. It just happens, in this time frame, that we're moving capital one way."

Wood said the focus for now is on the SCOOP’s Woodford Shale, with more testing of the Sycamore formation and Springer Shale likely in the future.

He reiterated too that a sale of the noncore interests, namely its stake in Mammoth Energy Services Inc. and legacy assets on the Gulf Coast, are still “on the table for us to monetize.” Any proceeds, he said, would likely go toward the share repurchase program.

Gulfport produced 1.393 Bcfe/d in 4Q2018, up from 1.263 Bcfe/d in the year-ago period and down slightly from 1.428 Bcfe/d in 3Q2017. For the full year, the company averaged 1.360 Bcfe/d, within guidance, and compared with production of 1.089 Bcfe/d in 2017.

Fourth quarter net income was $134 million (78 cents/share), versus net income of $156.5 million (85 cents) in the year-ago period.

For 2018, Gulfport reported net income of $430.6 million ($2.45/share), compared to net income of $435.2 million ($2.41) in 2017. Full year revenue increased to $1.4 billion from $1.3 billion.