Breaking Down Gulfport Energy Corporation (GPOR) Financial Health: Key Insights for Investors

Understanding Gulfport Energy Corporation (GPOR) Revenue Streams

Understanding Gulfport Energy Corporation’s Revenue Streams

Gulfport Energy Corporation generates revenue primarily from the sale of natural gas, oil, and natural gas liquids (NGL). The following table summarizes the company's sales figures for the three and nine months ended September 30, 2024, compared to the same periods in 2023.

For the nine months ended September 30, 2024, the revenue breakdown is as follows:

The overall revenue for the first nine months of 2024 was significantly impacted by a decrease in both sales volumes and realized prices across all segments, particularly in natural gas, where the average price without the impact of derivatives dropped from $2.38 per Mcf in the prior year to $1.85 per Mcf in 2024.

Year-over-year revenue growth rates for the three months ended September 30, 2024, showed a decrease of 5% compared to the previous year, while the nine-month comparison indicated an 18% decline in total revenue. The following table summarizes the year-over-year growth rates:

In terms of revenue contribution by segment, natural gas remains the predominant source, contributing approximately 76% of total sales in the nine months ended September 30, 2024, followed by NGLs at 12.5% and oil and condensate at 10.9%.

Significant changes in revenue streams during 2024 include a notable decrease in natural gas sales due to a 22% drop in realized prices and a 2% increase in sales volumes. Conversely, oil and condensate sales experienced a 45% increase in production volumes, despite an 11% decrease in realized prices.

Overall, while the company has seen fluctuations in its revenue streams, strategic adjustments to production and sales from new wells targeting high-yield areas have partially offset some declines in pricing and market demand.

A Deep Dive into Gulfport Energy Corporation (GPOR) Profitability

Profitability Metrics

In analyzing the profitability of Gulfport Energy Corporation, several key metrics are vital: gross profit, operating profit, and net profit margins. Here’s a comprehensive overview of these profitability metrics for 2024.

Gross Profit, Operating Profit, and Net Profit Margins

For the nine months ended September 30, 2024, Gulfport reported total revenues of $718.3 million. The breakdown of revenues is as follows:

• Natural gas sales: $492.6 million
• Oil and condensate sales: $70.3 million
• NGL sales: $80.9 million
• Net gain on derivatives: $74.5 million

Operating expenses totaled $640.0 million, resulting in an operating income of $78.3 million. The net income attributable to common stockholders for the same period was $7.3 million, translating to a net profit margin of approximately 1.02%.

Trends in Profitability Over Time

Comparing the nine months ended September 30, 2024, to the same period in 2023, total revenues decreased from $1.3 billion to $718.3 million, a decline of approximately 45%. This reduction was primarily attributed to lower realized prices for natural gas, which fell by 22%.

Net income for the nine months ended September 30, 2024, was significantly lower than the $1.2 billion reported in the same period of 2023, reflecting a substantial decrease in profitability driven by lower revenues and increased operating expenses.

Comparison of Profitability Ratios with Industry Averages

When comparing profitability ratios, the net profit margin of 1.02% for Gulfport Energy is notably below the industry average, which typically hovers around 10-15% for similar companies in the exploration and production sector. This discrepancy highlights the challenges the company faces in maintaining profitability amid fluctuating commodity prices.

Analysis of Operational Efficiency

Gulfport's operational efficiency can be assessed through its cost management practices and gross margin trends. For the nine months ended September 30, 2024, the average lease operating expenses were $1.18 per Mcfe, slightly up from $1.12 per Mcfe in the previous year. This increase indicates a need for improved cost management strategies.

General and administrative expenses increased by 12% year-over-year, totaling $30.4 million. This rise in overhead costs further pressures profit margins and highlights the necessity for operational efficiencies.

Debt vs. Equity: How Gulfport Energy Corporation (GPOR) Finances Its Growth

Debt vs. Equity: How Gulfport Energy Corporation Finances Its Growth

As of September 30, 2024, Gulfport Energy Corporation reported a total debt of $705.7 million. This includes $25.7 million in 2026 Senior Notes and $650.0 million in 2029 Senior Notes.

The company’s debt-to-equity ratio stands at approximately 0.34, which is below the industry average of 0.5. This indicates a conservative approach to leveraging, favoring equity financing over debt.

Recent debt activity includes the issuance of $650.0 million in 6.750% senior notes due 2029 and the repurchase of $524.3 million of the 2026 Senior Notes. Following this, the company incurred a loss on debt extinguishment of $13.4 million, which included cash costs of $12.9 million. The new notes extend the maturity of existing debts, enhancing liquidity.

Credit ratings for the company remain stable, with the recent senior notes rated in the high yield category, reflecting investor confidence despite market volatility.

To balance between debt financing and equity funding, Gulfport has engaged in share repurchase programs, buying back 711,829 shares for about $104.4 million during the nine months ended September 30, 2024. This strategy not only returns capital to shareholders but also helps manage equity levels amidst fluctuating market conditions.

As of October 28, 2024, the company had $10.0 million in borrowings outstanding on its Credit Facility. The liquidity position is further strengthened by $3.3 million in cash and equivalents, showcasing a robust financial health.

Assessing Gulfport Energy Corporation (GPOR) Liquidity

Assessing Gulfport Energy Corporation's Liquidity

Current Ratio: As of September 30, 2024, the current ratio is calculated as follows: Current Assets / Current Liabilities. The company had current assets amounting to $3.2 million in cash and cash equivalents, $111.1 million in accounts receivable, and $73.8 million in derivative assets, totaling approximately $188.1 million. Current liabilities included $30.0 million in borrowings under the Credit Facility and $25.7 million in outstanding 2026 Senior Notes, totaling around $55.7 million. This results in a current ratio of approximately 3.38.

Quick Ratio: The quick ratio, which excludes inventory from current assets, is calculated as (Current Assets - Inventory) / Current Liabilities. Given that inventory is negligible in this sector, the quick ratio is similar to the current ratio, approximately 3.38.

Working Capital Trends: As of September 30, 2024, working capital is calculated as current assets minus current liabilities: $188.1 million (current assets) - $55.7 million (current liabilities) = $132.4 million. This indicates a strong liquidity position compared to the previous year when working capital was approximately $150.0 million, reflecting a slight decrease of 11.7%.

Cash Flow Statements Overview

Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities was $501.2 million, down from $567.7 million for the same period in 2023, a decrease of 11.7%. This decline is primarily attributed to reduced natural gas revenues.

Investing Cash Flow: Cash used in investing activities for the nine months ended September 30, 2024, was ($379.1 million), compared to ($419.9 million) in 2023, reflecting a decrease of 9.7%. Major expenditures included $267.8 million in drilling and completion costs and $89.9 million in leasehold acquisitions.

Financing Cash Flow: Cash used in financing activities totaled ($1.0 billion) for the nine months ended September 30, 2024, primarily due to principal payments of ($825.0 million) on the Credit Facility and ($524.3 million) for the retirement of the 2026 Senior Notes. This was partially offset by borrowings of $737.0 million.

Liquidity Concerns or Strengths

The company reported total liquidity of $909.4 million as of September 30, 2024. This includes cash on hand, available credit under the Credit Facility, and undrawn letters of credit. The liquidity position reflects a strong ability to meet short-term obligations and fund operations.

Potential Liquidity Concerns: Despite the solid liquidity position, the decrease in operating cash flow and the high capital expenditures could raise concerns regarding future cash generation capabilities. The company’s dependence on commodity prices remains a risk factor, as fluctuations could adversely affect revenues and cash flows.

Is Gulfport Energy Corporation (GPOR) Overvalued or Undervalued?

Valuation Analysis

The valuation analysis of the company focuses on critical financial ratios and stock performance indicators relevant to investors.

Price-to-Earnings (P/E) Ratio

The current P/E ratio stands at 13.65 based on the trailing twelve months (TTM) earnings per share (EPS) of $10.42. This is indicative of the market's valuation of the company's earnings potential.

Price-to-Book (P/B) Ratio

The P/B ratio is calculated at 1.15, reflecting a book value of $15.32 per share. This suggests that the stock is trading slightly above its book value, which may imply a modest premium for the company's assets.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EV/EBITDA ratio is currently at 6.8, which positions the company favorably compared to industry peers, indicating a potentially undervalued status relative to its earnings before interest, taxes, depreciation, and amortization.

Stock Price Trends

Over the last 12 months, the stock price has fluctuated between a low of $75 and a high of $155. As of the latest trading session, the stock price is $146.17, reflecting a 3.5% increase year-to-date.

Dividend Yield and Payout Ratios

The company offers a dividend yield of 1.5%, with a payout ratio of 30% of its net income. This demonstrates a commitment to returning value to shareholders while retaining adequate earnings for growth.

Analyst Consensus on Stock Valuation

The analyst consensus recommends a “Hold” rating, with a price target range of $140 to $160. This indicates that analysts believe the stock is fairly valued at its current price, with potential for moderate growth.

Key Risks Facing Gulfport Energy Corporation (GPOR)

Key Risks Facing Gulfport Energy Corporation

Industry Competition: The energy sector is highly competitive, with numerous players vying for market share. As of September 30, 2024, Gulfport's natural gas production averaged approximately 970,842 Mcf/day, which is slightly up from 953,989 Mcf/day a year prior. However, this growth is challenged by competitors in the Appalachia and Anadarko basins, which may hinder market positioning.

Regulatory Changes: The oil and gas industry is subject to extensive regulation at federal, state, and local levels. Changes in environmental regulations can increase operational costs. The impact of ongoing regulatory scrutiny is evident, as the company faced $3.4 million in income tax expenses for the nine months ended September 30, 2024, compared to an income tax benefit of $554.7 million for the same period in 2023.

Market Conditions: Commodity price volatility significantly affects revenue generation. For instance, natural gas revenues decreased by 20% from $619.2 million in 2023 to $492.6 million in 2024, driven by a drop in average realized prices from $2.69 per Mcf to $2.10 per Mcf.

Operational Risks: The company reported total operating expenses of $640.0 million for the nine months ended September 30, 2024, up from $610.2 million in 2023. Increased costs in lease operating expenses and transportation could impact profitability.

Financial Risks: As of September 30, 2024, Gulfport had total funded debt of $705.7 million, including $25.7 million of 2026 Senior Notes and $650.0 million of 2029 Senior Notes. The company’s ability to service this debt amid fluctuating cash flows poses a risk to financial stability.

Strategic Risks: The company has engaged in share repurchase programs, repurchasing 341,132 shares for $49.9 million in Q3 2024. This strategy may limit available capital for other investments and operational needs.

Mitigation Strategies: The company utilizes derivative contracts to mitigate the impact of commodity price volatility. As of September 30, 2024, Gulfport reported a net gain on natural gas derivatives of $74.5 million, compared to $514.3 million in the previous year.

Additionally, the company has extended the maturity of its credit facility to 2028, enhancing liquidity and financial flexibility.

Future Growth Prospects for Gulfport Energy Corporation (GPOR)

Future Growth Prospects for Gulfport Energy Corporation

Analysis of Key Growth Drivers

The company is focusing on several key growth drivers, including:

• Product Innovations: Implementing advanced drilling techniques to optimize production rates.
• Market Expansions: Targeting emerging markets for natural gas, particularly in the Appalachia and Anadarko basins.
• Acquisitions: Potential acquisitions to enhance asset base and production capabilities.

Future Revenue Growth Projections and Earnings Estimates

Projected revenues for 2024 are estimated at $718.3 million, which reflects a significant decrease from $1.3 billion in 2023, primarily due to market fluctuations and operational challenges. Earnings estimates suggest a net income attributable to common stockholders of approximately $7.3 million in Q3 2024, compared to $1.04 billion in the same quarter of the previous year.

Strategic Initiatives or Partnerships

The company has entered into several strategic partnerships to enhance operational efficiencies. Notably, its recent agreement to extend the maturity of its Credit Facility to 2028 and the successful refinancing of its Senior Notes to 2029 positions it favorably for future capital investments.

Competitive Advantages

Gulfport Energy Corporation's competitive advantages include:

• Strong Liquidity Position: At the end of Q3 2024, the company reported total liquidity of $909.4 million.
• Operational Flexibility: The ability to adjust production strategies in response to market conditions.
• Experienced Management: A leadership team with a proven track record in navigating the energy sector.

Production and Financial Performance Overview

As evidenced by the above metrics, the company's operational stability amid challenging market conditions reflects its strategic focus on optimizing production and managing costs effectively.

Updated on 16 Nov 2024

Resources:

1. Gulfport Energy Corporation (GPOR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Gulfport Energy Corporation (GPOR)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Gulfport Energy Corporation (GPOR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.