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Gulfport Energy Reports 1Q 2013 Results

Source: www.gulfoilandgas.com 5/7/2013, Location: North America

Gulfport Energy Corporation reported financial and operating results for the first quarter of 2013 and provided an update on its 2013 activities.

For the first quarter of 2013, Gulfport reported net income of $44.6 million on oil and natural gas revenues of $54.9 million, or $0.61 per diluted share. EBITDA (as defined below) for the first quarter of 2013 was $99.0 million and cash flow from operating activities before changes in working capital (as defined below) was $35.7 million.

Gulfport's 2013 first quarter results include $61.1 million of mark to market income in connection with Gulfport's 21.4% equity interest in Diamondback Energy, Inc. ("Diamondback"), a NASDAQ Global Select Market listed company. Associated with this taxable income was $23.7 million of income tax expense. Excluding the effects of this income and associated non-cash income tax expense, adjusted net income for the first quarter of 2013 would have been $7.1 million, or $0.10 per diluted share.

Financial Highlights
- Produced oil and natural gas sales volumes of 575,543 barrels of oil equivalent ("BOE"), or 6,395 barrels of oil equivalent per day ("BOEPD")
- Recorded net income of $44.6 million
- Generated $99.0 million of EBITDA

Production
For the first quarter of 2013, net production was 516,954 barrels of oil, 319,658 thousand cubic feet ("MCF") of natural gas and 223,126 gallons of natural gas liquids ("NGL"), or 575,543 BOE. Net production for the first quarter of 2013 by region was 268,448 BOE at West Cote Blanche Bay ("WCBB"), 223,520 BOE at Hackberry, 72,134 BOE in the Utica Shale and an aggregate of 11,441 BOE in the Bakken, Niobrara and other areas.

Realized prices for the first quarter of 2013, which includes transportation costs, were $102.68 per barrel of oil, $4.59 per MCF of natural gas and $1.45 per gallon of NGL, for a total equivalent price of $95.34 per BOE. Realized price for oil in the first quarter of 2013 reflects the impact of fixed price contracts for approximately 5,000 barrels of oil per day at a weighted average price of $101.96 before transportation costs and differentials. Gulfport currently has fixed price swaps in place for 5,000 barrels of oil per day at a weighted average price of $100.55 for the remainder of 2013.

Bank Redetermination
In connection with the spring redetermination of Gulfport's revolving credit facility, Gulfport's lead lender has provided a commitment letter that increases Gulfport's borrowing base from $40 million to $50 million, provides for an improved pricing grid and extends the maturity date of the facility to May 2018, subject to the approval of the additional banks within the syndicate.

Recent Operational Highlights
- In the Utica Shale, Gulfport currently has nine wells flowing into sales pipelines.
G- ulfport currently plans to increase its Utica Shale operated horizontal rig count from three rigs at the end of the first quarter of 2013 to seven rigs by the end of June 2013.
- Gulfport recently tested its Lyon 1-27H well in the Utica Shale. The Lyon 1-27H tested at a peak rate of 1,087 barrels of condensate per day, 2.5 million cubic feet ("MMCF") per day of natural gas and 343 barrels of NGLs per day assuming full ethane recovery and a natural gas shrink of 21%, or 1,759 BOEPD.
- Gulfport recently tested its Lyon 2-27H well in the Utica Shale. The Lyon 2-27H tested at a peak rate of 1,373 barrels of condensate per day, 1.8 MMCF per day of natural gas and 279 barrels of NGLs per day assuming full ethane recovery and a natural gas shrink of 23%, or 1,883 BOEPD.
- Gulfport's Stout 1-28H well was recently placed on production in the Utica Shale. The Stout 1-28H produced at an average 24-hour sales rate of 443 barrels of condensate per day, 4.2 MMCF per day of natural gas and 517 barrels of NGLs per day assuming full ethane recovery and a natural gas shrink of 19%, or 1,527 BOEPD.
- Gulfport's Stout 2-28H well was recently placed on production in the Utica Shale. The Stout 1-28H produced at an average 24-hour sales rate of 413 barrels of condensate per day, 3.3 MMCF per day of natural gas and 446 barrels of NGLs per day assuming full ethane recovery and a natural gas shrink of 20%, or 1,299 BOEPD Gulfport spud a total of nine wells in Southern Louisiana during the first quarter of 2013, completing five of the wells as productive. One well was waiting on completion and three wells were still being drilled at the end of the quarter. - Grizzly Oil Sand ULC ("Grizzly"), in which Gulfport owns a 24.9% interest, recently began commissioning at its first SAGD facility at Algar Lake.
- Nine rigs are currently active in Gulfport's three core operating areas, with four horizontal rigs and two top-hole rigs drilling in the Utica, two rigs drilling at Hackberry, and one rig drilling at WCBB.

Operational Update
Utica Shale

In the Utica Shale, Gulfport spud 10 gross (7.7 net) wells during the first quarter of 2013. At the end of the first quarter, Gulfport had one gross well waiting on completion, three gross wells being drilled by horizontal rigs, five gross wells with their vertical sections completed and waiting on a horizontal rig, and one gross well being drilled with a top-hole rig. Gulfport is currently operating four horizontal rigs and two top-hole rigs in the Utica Shale. Gulfport currently plans to accelerate its 2013 drilling program, increasing its Utica Shale operated horizontal rig count to seven rigs by the end of June 2013. During 2013, Gulfport has budgeted $494 million to $504 million to drill approximately 55 to 60 gross (49 to 54 net) wells in the Utica Shale . At present, Gulfport has three horizontal rigs drilling ahead on the sixth through eighth gross (fourth and sixth net) wells, one horizontal rig rigging up on the ninth gross (seventh net) well, and two top hole rigs are drilling ahead on the fourteenth and fifteenth gross (eleventh and twelfth net) wells of 2013 in the play.

Gulfport recently tested its Lyon 1-27H and Lyon 2-27H wells in the Utica Shale. The Lyon 1-27H was drilled to a true vertical depth of 7,466 feet with a 6,694 foot horizontal lateral. Following a 45-day resting period, the well tested at a gross peak rate of 1,087 barrels of condensate per day and 2.5 MMCF per day of natural gas. Based upon composition analysis, the gas being produced is 1,271 BTU rich gas. Assuming full ethane recovery, the composition above is expected to produce an additional 137 barrels of NGLs per MMCF of natural gas and result in a natural gas shrink of 21%. In ethane rejection mode, the composition is expected to yield 61 barrels of NGLs per MMCF of natural gas and result in a natural gas shrink of 8%.

The Lyon 2-27H was drilled to a true vertical depth of 7,481 feet with a 7,100 foot horizontal lateral. Following a 45-day resting period, the well tested at a gross peak rate of 1,373 barrels of condensate per day and 1.8 MMCF per day of natural gas. Based upon composition analysis, the gas being produced is 1,320 BTU rich gas. Assuming full ethane recovery, the composition above is expected to produce an additional 155 barrels of NGLs per MMCF of natural gas and result in a natural gas shrink of 23%. In ethane rejection mode, the composition is expected to yield 80 barrels of NGLs per MMCF of natural gas and result in a natural gas shrink of 11%. Gulfport currently anticipates the Lyon 1-27H and Lyon 2-27H will begin flowing into a sales pipeline by mid-June.

Gulfport recently began flowing into sales pipelines its Stout 1-28H and Stout 2-28H wells in the Utica Shale. The Stout 1-28H was drilled to a true vertical depth of 8,054 feet with a 6,003 foot horizontal lateral. Following a 40-day resting period, the well was placed on production at a gross 24-hour peak sales rate of 443 barrels of condensate per day and 4.2 MMCF per day of natural gas. Based upon composition analysis, the gas being produced is 1,237 BTU rich gas. Assuming full ethane recovery, the composition above is expected to produce an additional 123 barrels of NGLs per MMCF of natural gas and result in a natural gas shrink of 19%. In ethane rejection mode, the composition is expected to yield 51 barrels of NGLs per MMCF of natural gas and result in a natural gas shrink of 7%.

The Stout 2-28H was drilled to a true vertical depth of 8,093 feet with a 6,914 foot horizontal lateral. Following a 40-day resting period, the well was placed on production at a gross 24-hour peak sales rate of 413 barrels of condensate per day and 3.3 MMCF per day of natural gas. Based upon composition analysis, the gas being produced is 1,269 BTU rich gas. Assuming full ethane recovery, the composition above is expected to produce an additional 135 barrels of NGLs per MMCF of natural gas and result in a natural gas shrink of 20%. In ethane rejection mode, the composition is expected to yield 63 barrels of NGLs per MMCF of natural gas and result in a natural gas shrink of 9%.

Gulfport ended the first quarter of 2013 with three gross wells producing. Subsequent to the first quarter, Gulfport began flowing an additional six gross wells into sales pipelines. Gulfport also anticipates an additional four gross wells to begin flowing into sales pipelines by mid-June.

Hackberry
At Hackberry, Gulfport drilled six wells, completing four wells as productive during the first quarter of 2013. Two wells were still being drilled at the end of the quarter. In addition, Gulfport performed nine recompletions at the field. At present, Gulfport has two rigs active at Hackberry drilling ahead on the seventh and eighth wells of 2013 at the field.

WCBB
At WCBB, Gulfport commenced its 2013 drilling program on March 1, 2013 and drilled three wells, completing one well as productive during the first quarter of 2013. One well was waiting on completion and one well was still being drilled at the end of the quarter. In addition, Gulfport performed 22 recompletions at the field. At present, Gulfport has one rig active at WCBB drilling ahead on the sixth well of 2013 at the field.

Canadian Oil Sands
In the Canadian Oil Sands, Grizzly began commissioning at its first SAGD facility at Algar Lake and expects first production during the third quarter of 2013. From an exploratory standpoint, Grizzly continues to work towards filing a regulatory application to support an initial 12,000 barrel per day ("bpd") SAGD project at May River by the end of 2013.

2013 Guidance Update
Gulfport currently estimates 2013 production to be in the range of 7.8 million to 8.1 million BOE. Capital expenditures for drilling activities during 2013 are estimated to be in the range of $570 million to $590 million. The increase in capital expenditures for drilling activities is due to Gulfport's accelerated activity in the Utica Shale. Gulfport now currently plans to drill 55 to 60 gross (49 to 54 net) wells in the Utica Shale.

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