Gulfport Energy Q1 2026 Earnings Call Transcript

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Provided by Quartr
May 6, 2026

Key Takeaways

  • Positive Sentiment: Gulfport announced Domenic J. Dell'Osso, Jr. will join as President & Chief Executive Officer on May 28, which the company says brings operational and financial discipline to propel the next chapter.
  • Positive Sentiment: Gulfport delivered a strong Q1 with $264 million adjusted EBITDA and $119 million adjusted free cash flow, average production ~997 Mcfe/d, and reaffirmed full‑year 2026 production and per‑unit operating cost guidance.
  • Positive Sentiment: The company repurchased 866,000 shares for ~$172.8 million in Q1 (part of ~8.2 million shares repurchased since program inception), is actively prioritizing buybacks funded by FCF and revolver capacity, and aims to keep leverage at or below 1x.
  • Positive Sentiment: Gulfport completed its discretionary acreage program, spending ~$102 million over four quarters to add >2 years of high‑quality inventory (over 4.5 years added since 2022) at an average cost below recent local transaction metrics.
  • Positive Sentiment: Operational execution improved with drilling and completion efficiency gains (new Utica tophole record, faster SCOOP cycle times), zero recordable incidents, a planned transition to a 1‑rig Ohio program later in 2026, and a back‑half bias toward more liquids‑rich turn‑ins.
AI Generated. May Contain Errors.
Earnings Conference Call
Gulfport Energy Q1 2026
00:00 / 00:00

There are 11 speakers on the call.

Speaker 7

Greetings, and welcome to the Gulfport Energy Corporation First Quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Jessica Antle. Please go ahead.

Speaker 3

Thank you, Carrie. Good morning. Welcome to Gulfport Energy Corporation's first quarter 2026 earnings conference call. I am Jessica Antle, Vice President of Investor Relations. Speakers on today's call include Michael Hodges, Executive Vice President and Chief Financial Officer, and Matthew Rucker, Executive Vice President and Chief Operating Officer. I would like to remind everybody that during this conference call, the participants may make certain forward-looking statements. Actual results in future events could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we may reference non-GAAP measures. Please refer to our most recent earnings release and investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.

Speaker 3

An updated Gulfport presentation was posted yesterday evening to our website in conjunction with the earnings announcement. Please review at your leisure. At this time, I would like to turn the call over to Michael Hodges.

Speaker 5

Thank you, Jessica, and thank you for joining our call today. Before we begin, I would like to take a moment to welcome a new leader to Gulfport that I know many of you are already familiar with. Last evening, we announced that Domenic J. Dell'Osso, Jr. will be joining Gulfport as our President and Chief Executive Officer beginning May the 28th. Following a thorough search process, the board unanimously agreed that Nick is the right leader at the right time to propel Gulfport into its next chapter. He brings more than two decades of energy industry experience, a sharp focus on operational and financial discipline, and a proven track record of delivering value to shareholders. Nick is joining Gulfport at a time when the company has never been stronger, and we're excited to work with him to create long-term value for all stakeholders.

Speaker 5

Nick looks forward to engaging with our employees and shareholders in the coming months and joining us to take your questions on our next quarterly call in August. With that said, we're off to a great start to 2026 at Gulfport, highlighted by the successful completion of our previously announced discretionary acreage acquisition program and a record quarter of share repurchase activity. I will share additional details on our land acquisition accomplishments a bit later, but we believe the swift and decisive actions we've taken over the past 3 years in the Ohio Utica have delivered significant value to the company as the demand for high quality, low break-even inventory across the industry continues to increase.

Speaker 5

When combining these initiatives to grow net as-asset value with our ability to repurchase nearly 10% of our market cap over the past 2 quarters at prices well below the underlying value of our business, it has been a very successful close to 2025 and start to 2026. Turning to our 1st quarter results, it was an especially strong kickoff to the year financially as the company generated $264 million of adjusted EBITDA and $119 million of adjusted free cash flow, driven by strong commodity pricing and the continued development of our high-quality asset base.

Speaker 5

Average production totaled 997 million cubic feet equivalent per day, which was consistent with the expectations we provided in February and keeps us on track to deliver on our previously stated full-year production guidance of 1.03 billion-1.055 billion cubic feet equivalent per day. Cash operating costs for the first quarter totaled $1.38 per million cubic feet equivalent, also in line with our expectations and similar to last year, what we expect to be a quarterly high point for Gulfport as we anticipate declining per unit costs as we move through the year.

Speaker 5

With our production cadence expected to accelerate later in 2026, the fixed charges embedded in our operating costs are expected to decline on a per unit basis over the course of the year and land within the range of our full year guidance. For full year 2026, we are reaffirming our per unit operating cost guidance, which includes LOE, midstream, and taxes other than income of $1.23 to $1.34 per Mcfe. On the capital front, we incurred a total of $118 million related to drilling and completion activity and $4 million related to maintenance, land, and seismic investment while achieving the significant operational success that Matt will address in his comments.

Speaker 5

Most importantly, as I mentioned earlier in the call, we wrapped up our previously announced discretionary acreage program, investing approximately $102 million over the past 4 quarters to add more than 2 years of high-quality inventory adjacent to our core positions in Belmont and Monroe counties. These acquisitions were made at an average cost of just over $2 million per net locations, significantly below implied recent valuation metrics from larger inorganic transactions in the immediate area. We have focused our efforts over the past few years in the wet gas and dry gas windows of the Ohio Utica, areas that generate some of the strongest returns in our portfolio and where we can convert these locations into producing assets in short order.

Speaker 5

As a reminder, since 2022, our targeted discretionary acreage acquisitions have added over 4.5 years of high-quality net locations, enhancing the durability of our asset base and reinforcing the significant value uplift we are achieving through the execution of our ground game leasing program. We continue to monitor opportunities to further strengthen our leasehold footprint and increase our resource depth. We believe these opportunities continue to rank extremely high as we evaluate the uses of free cash flow in 2026 and beyond. Turning to the balance sheet, our financial position remains strong, and we recently completed our spring borrowing base redetermination, adding 10% to elected bank commitments and reaffirming the borrowing base at $1.1 billion. Our trailing 12-month net leverage exiting the quarter was approximately 0.9 times.

Speaker 5

Pro forma for the increase in elected commitments, at the end of the first quarter, Gulfport's liquidity increased by $100 million and totaled $872 million, comprised of $2.9 million of cash plus $869.3 million of borrowing capacity under our revolver. We greatly appreciate the support of our bank group as we position the company to opportunistically deliver value to our shareholders, and our liquidity position is more than sufficient to fund our development needs for the foreseeable future, providing significant financial flexibility as we continue executing on our capital allocation strategy. As I mentioned earlier, with this balance sheet strength and liquidity in place, we continue to deploy capital towards shareholder returns through our share repurchase program.

Speaker 5

During the first quarter, we repurchased 866,000 shares of common stock for approximately $172.8 million, representing the highest quarterly investment in company history and well ahead of our previously announced plans in February. As of March 31st, and since the inception of the program, we have repurchased approximately 8.2 million shares of common stock, including the preferred redemption in 2025, at an average price of just over $133 per share, more than 30% below our current share price, and totaling nearly $1.1 billion of capital returned to shareholders over the past four years.

Speaker 5

Over just the last two quarters alone, we have allocated over $300 million towards repurchasing what we believe to be our undervalued common stock, resulting in the retirement of nearly 10% of our shares outstanding. Given our current valuation and the strength of our underlying fundamentals, we expect share repurchases to remain an attractive capital allocation priority and plan to maintain an active repurchase program through 2026, supported by adjusted free cash flow and available revolver capacity, all while maintaining leverage at or below 1 time. In closing, Gulfport is delivering consistent financial results, maintaining disciplined capital allocation across asset bases, and returning significant capital to our shareholders, all while preserving flexibility to navigate market conditions and pursue value-enhancing opportunities.

Speaker 5

With a strong foundation in place and a proven leader joining our company, we are confident in our ability to continue executing our strategy and creating durable long-term value for our shareholders. Now I will turn the call over to Matt to discuss our operational highlights for the quarter.

Speaker 4

Thank you, Michael. Operationally, during the first quarter, the company completed drilling of 8 gross wells comprising of 2 Utica wet gas wells, 4 Marcellus wells, and 2 SCOOP Woodford wells. We entered the year with 3 operating drilling rigs running. As planned, released the SCOOP rig at the end of the first quarter and currently have 2 rigs drilling ahead in Ohio. We plan to release 1 rig at the end of the second quarter, transitioning to a 1-rig program in Ohio for the remainder of 2026. On the completions front, we brought 5 gross Utica dry gas wells online during the first quarter, including our first 2 Utica development wells, which continue to perform consistent with recently developed straight lateral offsets. Importantly, this activity has unlocked approximately 1 year of additional high-quality inventory that can be strategically placed in our future development plan, providing additional flexibility.

Speaker 4

Looking ahead, we have an active completion and turn-in-line schedule ahead of us, with approximately two-thirds of our remaining 2026 turn-in-lines expected to include a significant liquids component in their production profile. This mix highlights the company's balanced approach to developing our assets and provides exposure to dynamic market conditions, allowing us to capture value across changing commodity price environments. Lastly, I'd like to compliment our team's continuous focus on operational improvements as we delivered strong results during the quarter. In the period with our highest level of activity, the operational teams executed with 0 recordable incidents or spills, underlying our commitment to safety and the environment in tandem with best-in-class operations. Our drilling team delivered an exceptional quarter, achieving incremental efficiency gains in each area of our core operations.

Speaker 4

In the Utica, we maintained our record all-in footage per day realized in 2025, and as we continue to extend lateral lengths across our asset base, we have concentrated our efforts on improving performance in the vertical section of the drilling phase to enhance overall cycle times. During the quarter, our average tophole drilling days improved by 8% compared to full year 2025, and we set a new company record for the fastest Utica tophole drilled for Gulfport to date, completing the section in just 5.4 days. Not only did we set a single well record, the four-well pad delivered an average top hole record of 5.9 days per well, demonstrating the opportunity for long-lived efficiency gains.

Speaker 4

In the Marcellus, we finished drilling a 4-well pad during the 1st quarter, and when compared to the prior two Gulfport-operated pads in the area, we delivered a 20% improvement in footage drilled per day. Lastly, and perhaps most notably, I'm extremely proud of our team's performance in the SCOOP and the drilling results achieved on our recent Hero pad. On average, the team delivered the pad with a spud to rig release time of approximately 40 days per well, beating our internal expectation of 55 days. These results highlight the team's ability to apply learnings from our best-in-class operations in Ohio and deliver more consistent execution in the SCOOP, where drilling is more challenging.

Speaker 5

Collectively, these results underscore the strength of our operating team's leadership and our ability to consistently deliver best-in-class execution across all of our operating areas. As we've discussed previously, the completion side of our operations has been continuing to perform at very high levels, and our emphasis there remains on maintaining those efficiencies. With that consistency, we've been able to deliver our first two pad turn-in-lines of the year on time and on budget. In summary, our operational results this quarter mirror the broader performance Michael outlined: disciplined execution, continuous improvement, and a focus on creating long-term value. The consistency we're seeing across our operating areas positions us well to support Gulfport's strategy. With Nick preparing to join our team, we're confident our operations are well aligned to support the next phase of execution and deliver durable returns over time.

Speaker 5

With that, I will turn the call back over to the operator and open the call up for questions.

Speaker 7

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question will come from Neal Dingman with William Blair.

Speaker 6

Morning all, Michael, Matt, thanks for the details. My first question, Michael, is probably for you. It's on capital allocation. Specifically, how do you all think about kind of, I guess, more on a go forward allocating for further discretionary acreage that, you know, again, stuff you've done seems to have fantastic upside versus your stock buyback. You've been very active and maybe add 1 more twist to this. You know, a quarter like that we're in now where probably your lowest free cash flow of quarter of the year. Would you consider using debt to do either of those if the opportunity existed?

Speaker 5

Hey, Neal, thanks for the question. I think it's an excellent one. I think our approach is, you know, consistent over the last few years, and it's been to capture as many of those high-quality locations as we can. You know, the opportunity set there obviously is, you know, it's been available to us, and I think those generate some of the highest returns when you think about being able to drill those in the near term. I think that's been a priority for us, and it continues to be a priority. We do believe there's still more running room there. We'll likely update the market a little bit later in the year on what we think that looks like for the rest of the year. I would say that's been consistently a high priority.

Speaker 5

I think, you know, the equities is still undervalued. It's certainly been a good opportunity for us to get that back at what we think are attractive prices. I'd say it's a combination of the two. The health of the balance sheet allows us that flexibility, as you pointed out, to lean on that a little bit in quarters where we may have a little bit less free cash flow. To your point, as we go into the second quarter, we do still have quite an active development program that Matt talked about. I think, you know, if we see opportunities to use the revolver to get some equity back at a good value, we would consider doing that. I'd, you know, our approach has been dynamic.

Speaker 5

I think we've stayed away from kind of formulaic approaches, and I think that's worked well for us as well. I'd summarize it by saying it's a combination of all of them, and it's something we evaluate continuously. You know, the priority around locations over the last few years, we feel like has been a strategically advantaged move for us. We think others are actually starting to follow along more closely to that. You know, we'll keep you guys updated as we have more details there. I think that, you know, that's gonna continue to be one of the highest priorities.

Speaker 6

No, great to hear. Yeah, your inventory sort of speaks for itself now. Secondly, on kind of around slide 6 on the marketing, you talked about optimizing the market strategy. I'm just wondering when doing that, again, how has that sort of evolved? When you're thinking about that marketing strategy, you know, again, do you all ever, you know, is there constraints if you wanted to crank up, maybe not quite in the marketing group, but if you wanna, I'm thinking more about takeaway. Is there any sort of constraints, you know, if you wanna crank up production as well? I'm kind of, I guess, twofold, maybe just how the marketing fits into if you wanna expand production at all.

Speaker 5

Yeah, it's a good question, Neil. I think there's really not any constraints around that. You know, we've got a very strong firm transportation portfolio that gives us good access to various locations, and I think, you know, that's been really to our advantage over the last few years. You know, we've got Gulf Coast access that gives us, you know, kind of LNG-type pricing. We've got Midwest exposure that we think is advantaged, certainly, in the seasonal periods, winter season that it tends to trade very well. We're able to sell gas, you know, locally as well. There's obviously a lot of excitement around data center demand, we feel like, you know, talked about on the last call, there's some improving outlook for prices even just in the Northeast.

Speaker 5

No constraints around being able to sell additional gas. I think, you know, we're always thinking about maximizing free cash flow, and you know, so far, we feel like the right way to do that has been to keep our production relatively flat. Certainly, if there was a signal, that that would be rewarded or that there's an opportunity to move the needle from a kind of a pricing perspective, something we could consider. I think the strategy has been very successful the last few years, and at least at this point, something that we feel like makes sense for our company. Yeah, really no constraints around midstream or downstream markets that would keep us from considering that type of an option.

Speaker 6

Thanks for the details.

Speaker 7

Our next question will come from Zach Parham with JPMorgan.

Speaker 10

Yes. First off, congrats on Nick joining the team. I think that's a great hire. My first question, I just wanted to ask, Matt, you talked a lot about drilling gains in both the SCOOP and in Appalachia. Could you unpack that a little bit more? Like, where do you think we are in the evolution of those drilling gains? Like, what's the runway in front of you to continue to shave days and hours off?

Speaker 4

Sure. Thanks, Zach. I think, you know, I'd categorize that in kind of the sixth inning, if you will, on baseball analogy. We've talked for a while about our completion side of the business, you know, achieving things like 22 hours pumping days and, you know, obviously there's only 24 hours in a day. It's really about maintaining efficiencies there. You know, we've talked a lot about the drilling side and the opportunity set in front of us, and I think this quarter just demonstrates that focus that the team's had and the ability for us to keep clawing at that. You know, what I'm most proud of is just hitting that in all 3 core areas and finding those gains, right?

Speaker 4

You know, when you think about the Utica, we've been doing that for a long time, and so now, you know, outside the curb and lateral, we're finding opportunities in the top hole section of the wells, which, you know, again, are incremental days that you can kind of gain back there. The Marcellus is relatively new to us, obviously, but, you know, as a company, but not, you know, as an operating team. Just now in our third pad there, we've been able to see that 50% increase even with the longest laterals that we've drilled in that play to date.

Speaker 4

Obviously the SCOOP being able to achieve kind of the 40-day cycle times there in a pretty challenging environment speaks to more of getting us in line with being a consistent program in that asset where we feel more comfortable about continuing to deploy capital there. Yeah, I think there's more room to go to be fair, great headway so far, kind of heading into 2026, where that's been a key focus area for us.

Speaker 10

Thanks. My follow-up, just wanted to ask on inflation and if y'all are seeing any inflation on service prices at this point. You know, there's obviously been some volatility in the commodity, we've seen some modest activity adds, in talking to the service providers, they think there's more coming, maybe not so much in Appalachia, but in other parts of the U.S. Just curious what you're seeing there?

Speaker 4

I mean, certainly we're seeing it around the diesel. You know, that's not only just straight fuel price, but that can bleed into things like logistics and trucking as well. I'd say that's where we're seeing the biggest move. You know, a lot of our heavy service contracts around pressure pumping and rigs and things like that are, you know, we do a good job of kind of locking that in, kind of in the year ahead or being constructive around that. No real impact to the capital. We're not changing guidance. I think some of these efficiencies we've talked about, Zach, have helped offset those recent impacts that we've seen kind of around the diesel.

Speaker 4

Again, we try to mitigate those things via our efficiencies and maintaining and improving those, and, you know, continue to work with our service providers, certainly in this challenging fuel environment that we're in right now. All in all, I'd say, you know, we're kind of net neutral at this point, you know, keeping an eye on it and certainly working with our providers as the year progresses.

Speaker 10

Thanks, Matt. That's really helpful.

Speaker 4

Sure.

Speaker 7

We'll hear next from Tim Rezvan with KeyBanc Capital Markets.

Speaker 9

Good morning, folks. Thank you for taking our questions. Mike, I wanted to start on repurchases. You gave specific targets the last two quarters. I know you exceeded it in the first quarter. You didn't give one going forward. You used kinda ambiguous language about saying it's an attractive use of capital. You know, we're looking at the first quarter, which was about half of the total for 2025. Should we just kinda think about what 100% of free cash flow is and kinda land there in the ballpark for this year? Just trying to kinda understand. I guess that's part A, and then part B is like, is there a reason you didn't put a number and a reason why you did put a number the last couple quarters? Thanks.

Speaker 5

Yeah. Yeah. Hey, Tim. Thanks for the question. I think if you think back to the fourth quarter and first quarter, you know, fourth quarter, we actually had some CapEx. We were doing some appraisal work, and we had some acceleration of some capital. I think there was, you know, logic around kind of giving a target and making sure the street understood that we were not borrowing against what we'd otherwise, you know, allocated to share repurchases, that we felt like, you know, that the accelerated capital was in addition to that. I think that was really the thought process there. We got into the first quarter, saw some opportunity in the equity, of course, and also had, you know, the wrap-up of our discretionary acreage program.

Speaker 5

Those were really the quarters where we gave more of a target. Then to your point, we ended up exceeding it here in the first quarter because we saw some opportunities with a block that we were able to pick up and also just some changes in what we felt like was the underlying value versus what the opportunity to buy it at was. That was really the strategy there. I think if you think about us going forward for the rest of the year, really more consistent, I guess, with what we've done the last four years, which is, you know, think about things on more of a full year basis, you know, not marry ourselves to a formula of try and be dynamic around it. You know, we won't kind of allocate quarter by quarter.

Speaker 5

We do think about it on more of an annual basis. You know, the balance sheet I mentioned being nine-tenths of a turn gives us some opportunity with a lot of free cash flow coming later this year. You know, we talked about we got a lot of liquids development coming up. We certainly see the environment for liquids, pretty positive right now. I don't think we will, you know, kind of allocate all to the later part of the year. I think we'll kinda see what near-term cash flows look like, whether that's second quarter, third quarter, even into fourth quarter, and we'll see where the equity trades and kind of allocate accordingly. I understand it's a little bit ambiguous.

Speaker 5

I think it's, you know, it's kind of intentionally that way because we wanna be dynamic around it, but we do see a lot of value there and plan to continue with the repurchase activity.

Speaker 9

Okay. Okay. That, that makes sense. As my follow-up, just on that theme of liquids, you know, I know you put a bar chart on slide 9 of your deck kind of showing the increase in liquid SKU. Can you just help us kind of ballpark think about that? Do you think about that as like a 15% sort of exit rate or back half liquid SKU? Where I'm going with this is, I know it's early and you have a new CEO coming, but do you feel like that's a better rate? You talked about getting balanced, but, you know, you were about 9% liquids in the first quarter. Should we assume you're kind of going to lean in and maybe that could be at a 15%+ level going forward?

Speaker 9

Just curious, any thoughts around that? Thanks.

Speaker 5

I think it's a good question. The nice thing as we sit here is that we have the option to make those changes. I think, you know, thinking back a few years ago, Matt and I joined, I don't think Gulfport had that flexibility in the program. You know, in answer to your question, I think those things are available to us where they weren't previously. As you go through the rest of the year, you're right, we will become a little bit more liquids heavy. You know, we've got a couple of wet gas Utica wells or pads coming up. We've got some Marcellus development coming up. Matt mentioned our SCOOP, which has a liquids component. There's a fair amount of liquids coming online for us at a very opportune time.

Speaker 5

As we go into 2027, we can start to make those decisions as well. You know, in terms of can we be 15% liquids, I mean, certainly we're a gas company, you've got a mature asset base that moving that needle, maybe to that level is a bit ambitious. I do think you'll see, as we go through the year, you know, us going to more of a low teens type of a liquids percentage, with the opportunity, Neal, or, I'm sorry, Tim, over time to take that even higher. Probably for this year it's back half weighted, call it low teens, we'll assess where we wanna go for 2027.

Speaker 9

Okay. Appreciate the responses. Thank you.

Speaker 7

Our next question will come from Carlos Escalante with Wolfe Research.

Operator

Hey, good morning, team. Thank you for taking our question. I'd like to ask my first question to you, Matt. On the North Marcellus pad or appraisal that you're drilling later this year, what if you can outline this for us, do you think it's the gross resource that the well spot is testing for? What's the EUR you need to see to justify a programmatic Marcellus North development versus considered maybe a one-off science test? I know that there is some production from one of your competitors up there that looks good, but wondering if you see anything in particular in your specific area.

Speaker 4

Yeah, sure, Carlos. Thanks for the question. I would bracket that, Carlos. There's not as much delineation for us. I think when we think about what types of EURs and deliverability we'll see there, we approximate it very similarly to our Marcellus South. Quite simply for us, it's a new pocket of development with, you know, not an infrastructure component at the moment with a third party.

Speaker 4

When you think about that, we're kinda going into there not guns a-blazing, we're going in with a 2-well approach, kinda one north, one south, to really just confirm our assumptions and make sure the liquids percentage, both NGLs and oil, and composition of that are, we understand it so that we can then go into a broader negotiation with our, you know, potential midstream providers to get the best economic output for that, you know, that block of acreage that we have. Nothing we need to see to pull the trigger, I would tell you.

Speaker 4

It's more of a let's just confirm our type curve from a liquids weighting perspective, and then immediately go into kind of those contract negotiations with a midstream provider and a processing provider, to really unlock that development and set, you know, good economic parameters around it.

Operator

Thank you, sir. That's very helpful. A quick follow-up and more a miscellaneous question, Mike. On hedges, you're targeting roughly 30%-40% of hedge coverage on 2027. Presumably you would start to work on that in the near term. Wondering at what 9-month level do you accelerate that or you contract that? Is there a floor below which you'd choose to stay unhedged on the view that the curve's too low, which you can make an argument that's, you know, there's a case to be made that could be true.

Speaker 5

Yeah, it's a good question, Carlos. I think, you know, on the hedging side, we try and remain flexible with that. Your observation on where we sit for 2027, I think we've talked previously, we kinda like to be in that 30%-70% range as we enter a year. We're near the lower end of that as you think about 27. Obviously, we've got, you know, six, seven months left here in 2026. I think we're pretty bullish on gas going into next year. I think the volatility that we saw earlier this year and that some of our peers have talked about really indicates that there's gonna be opportunities to create value through the hedge program.

Speaker 5

I think, you know, for us, we like that we have that baseline amount in place already for 2027, and from here, I think we can just nibble when there's opportunities. You know, I don't feel like we have to go do anything or that we're gonna be kind of pushing to increase that maybe as you mentioned, in the near term, unless we see some of those. Typically, this time of year is perhaps not where you get a lot of those opportunities. You know, as we get into next year, we'll continue to adjust. You know, there's been years where we're a little bit more bearish, and we're at the higher end of the range that I described, and there's been years where we're a little bit more bullish.

Speaker 5

Right now, I'd say we're a little on the bullish side, so we may keep that a little bit lower. It'll be a kind of a dynamic process as we continue to assess what 2027 looks like.

Operator

Thank you, guys, and congrats on the hire.

Speaker 7

We'll go next to Jacob Roberts with TPH.

Speaker 2

Good morning.

Speaker 5

Morning, Jake.

Speaker 2

Hey. Hey, guys. I wanted to start on the SCOOP. Obviously some decent results there. Just wondering, you guys have said in the past that the SCOOP was competitive with your Northeast assets, and the implication here is that it's become even more competitive. Just wondering what you're needing to see in the market to, you know, allocate a more meaningful amount of capital to that asset and maybe even where you see this asset participating in that growth scenario or the market to call for it that you spoke about.

Speaker 4

Yeah, sure. Thanks for the question, Jake. I'll start, Michael can add his comments. You know, I think the results here that we're talking about on the drilling side, are a great step in the right direction for us. We've talked about it for the last couple of years, is really for that SCOOP asset, it's finding the operational execution, consistency. You know, if we're able to get those drilling days kind of 40, sub 40 and do it consistently and repeatably, it certainly gives us a lot more confidence in that asset if the time calls for us to accelerate some activity there. You know, as you think about it in our entire portfolio on a single well IRR, it certainly does compete.

Speaker 4

When you start to blend that in, currently it's still, it's still a capital-intensive asset with longer cycle times. You know, we're very mindful of that as we think about kind of our calendar year cadence and what that does for the company. You know, we look at that on an annual basis. I think for this year, you know, we'll get these wells completed and turn to sales here sometime later in 2Q, and we'll evaluate those results. You know, it'll be part of our program moving forward to the extent, you know, we look to flex into that more in the later years. I think that's, you know, something we'll always be looking at as far as just our overall capital allocation program.

Speaker 4

Really it's about just seeing that consistency every time we go to drill, Jake. With this one being the best one we've done so far, you know, we'd certainly like to see that again before we make any radical changes around that.

Speaker 2

Thank you. That's helpful. On this for follow-up, I wanted to touch on the liquids hedging. Saw you guys added some swaps in addition to the collars on the oil side during 2027, as well as some propane swaps through 2027. Just wondering what the thinking is there, and then should we expect that number to move higher throughout this year?

Speaker 5

Yeah, it's a great observation there, Jake. I think, obviously that market has improved here in the last couple of months, and we really didn't have a lot in place for that component of our revenue stream. I think we saw an opportunity there to put a position in. Again, I think, you know, from our perspective, we like to be somewhere in that 30%-70% range that I mentioned earlier. We saw that and kind of layered those in. I think, you know, that's an area where you kind of have to monitor all the geopolitical events and decide, you know, whether or not you think those get resolved in the near term or a little bit longer term. We're not gonna try and get too cute with it.

Speaker 5

You know, I think if there's opportunities where we feel like we can capture a little bit more value, we could do that. I do think we made some good progress looking out into next year at some prices that are quite frankly very attractive based on kind of where we've seen realizations for both WTI and NGLs. You know, we'll kind of assess our program for 2027, as I mentioned earlier. To the extent that we want to, you know, continue to lean in on the liquid side, we have unhedged barrels potentially there that you could always kind of shift around. Of course, that's a way of kind of adjusting your hedge % through your own activity.

Speaker 5

I think that's one that we'll continue to monitor as we think about what the right blend for 2027 looks like.

Speaker 2

Thanks. Appreciate the time, guys.

Speaker 7

Moving next to Peyton Dorne with UBS.

Speaker 8

Hey, good morning, everybody. Thank you for getting me on. First question on my end, maybe for Mike. You know, gas pricing was really strong in the first quarter. I'm just curious if you could provide maybe some color on how you see differentials sort of trending here in 2Q, and then maybe how you see them shaping up a bit as we progress into the summer months.

Speaker 5

Yeah. Hey, Peyton. Thanks for the question. I think, you know, I do wanna give a, you know, a pat on the back to our marketing team. I know a number of the operators in the Northeast saw some opportunities with the setup going into February and capturing some of the first of the month pricing. I think our team did an excellent job following suit there and certainly led to some pretty outstanding differentials and overall realizations for the quarter. You know, that's something that we work on consistently here. It doesn't get a lot of airtime just because it's a pretty routine process, but we sit down and go through that. I think as you go out, I think we're still bullish on differentials overall.

Speaker 5

It's something that we talked about on the last quarterly call, I think some of our peers are starting to talk about as well, that a lot of the demand that we're seeing coming in the Northeast, specifically around the data centers and the power demand, seems to be lifting that long-term view on basis in the Northeast. Again, it's an important component of our differential. We certainly have exposure to the Gulf Coast and to the Midwest, but still do have some of that Northeastern exposure that we think is only gonna rise going forward. You know, our full year guide on differentials, we feel is still appropriate.

Speaker 5

I'll be honest, I think that there's some opportunity for some improvement there as we go into later years, 27, 28, some of that demand starts to show up. Those are meaningful to our company. If you think about, you know, just even a $0.05 move in differentials and what that could mean to the bottom line in terms of free cash flow and EBITDA, it's pretty important to us. Yeah, I think where we're setting up for the year is really good, do feel bullish about where things are headed in the future.

Speaker 8

Great. Thanks for all that detail. I just wanna go back to the Valor pad in the Marcellus. You know, it was nice to see the drilling efficiencies that you guys had obtained there. I know you had changed the completion design a bit in the Marcellus when you went from the Hendershot pad to the Yankee pad. You targeted the formation a bit differently too. I'm just curious how you might have attacked Valor pad, and then what learnings you kind of incorporate into that pad from both Hendershot and Yankee for this most recent one. Thank you.

Speaker 4

Yeah, sure. I mean, some of the, some of the completion design changes or testing you spoke of was more around, you know, the Hendershot was kind of a 2 well, one in each direction, unbounded, delineation test initially. Then with the Yankee that we did last year, the 4-well pad was more of a true development on our, on our spacing assumptions.

Speaker 4

I'd say we certainly learned a lot from that. I think, kinda confirmed our spacing assumptions is where we wanted it to be. I would tell you that, the designs around the Valor are more about optimizing the economics of that. You think about the well spacing, and how much sand you need, how much water you need, to effectively drain, that wellbore. We took those learnings and kind of applied it here to look at the best economic outcome. On this pad, that's what we did. Kind of with the ability to have 4 wells, there's, you know, we did a little bit of incremental testing, on 2 of the inner laterals that we're looking at as well, just minor tweaks to again, just continue to get more economically efficient there.

Speaker 5

More to come with that, but that's kinda the evolution of what we've been doing there, to your question and look forward to, you know, sharing those results later in the year.

Speaker 8

Sounds great. Look forward to seeing those. Thanks a lot.

Speaker 4

Thanks, Peyton Dorne.

Speaker 7

We'll go next to Gabe Daoud with Truist.

Speaker 1

Thanks, operator. Morning, everyone. Thanks for the time and congrats on bringing Nick aboard. Was wondering maybe, Mike, on the back of your comments to the last question around in basin pricing improving later this decade. I guess on the back of that, are there any transport agreements that could be rolling in that period where you would, I guess, let roll to provide a tailwind to the cost structure and margins?

Speaker 5

Yeah, I mean, it's a good question, Gabe. I mean, we're always assessing kinda what we have, and there's always, you know, smaller pieces within the portfolio that sometimes aren't as critical. I would say that you consider letting go from time to time that do help a little bit. There's also opportunities, you know, you guys are probably aware to optimize your book and even offload some of those on shorter term basis to other operators maybe that need space. I think as basis improves in the Northeast, there's probably more of those kind of net back decisions that you can make around your firm portfolio and whether or not it makes sense to hold all of it.

Speaker 5

I would tell you that just kind of from a strategic perspective, we feel really good about the diversity that we have and the exposure to the different basins. I don't know that I would forecast us making significant changes. I mean, having the exposure in the mid-Midwest, having the exposure to the Gulf Coast, just even the diversity from a risk mitigation perspective, I think makes a lot of sense. I think, yeah, maybe to summarize, there's probably some small improvements that you may see on the cost structure, just even within our portfolio around our Northeastern position, but nothing that I would say would be a wholesale strategic shift for Gulfport at this point.

Speaker 1

Got it. Got it. Thanks, Mike. That's helpful. Makes sense. I guess just as a follow-up, your discretionary land program has been pretty successful over the last several years, extending inventory life. Just curious, how should we think about that program for 2026 and moving forward?

Speaker 5

Yeah, I'm glad you asked, Gabe. It really has been a big part of our success over the last few years. I think, you know, we're actually in the process right now of formulating our thoughts around it. We do like to have a very clear path when we come out and talk about it. We do think there continues to be some exciting opportunities around the basin. It's typically been something we talk about around the mid-year. I know our next call is likely to be in August. You know, over the last few years, I think we've done somewhere between $50 million and $100 million of discretionary acreage programs. I think, to the extent that we've been successful, which we have, I think we like that allocation of capital like I talked about earlier.

Speaker 5

I think there's a strong likelihood that we'll have something to talk about mid-year that's a pretty exciting opportunity to capture more land this year. It's not unlimited. I mean, there's certainly you have to be smart about it. There's areas that we feel like we can find locations that move into the near-term development plan, which really is what enhances the economics the most. It's really not a carpet bombing exercise. It's us going out and trying to make sure that we have that line of sight before we allocate the dollars. We'll talk about it more later this year, but I'm you can probably sense in my tone that I'm pretty excited about what we'll have to share later on.

Speaker 1

Yeah. No, for sure. Thanks, Mike. That's a great color. Really appreciate it.

Speaker 5

Thanks.

Speaker 7

This now concludes our question and answer session. I would like to turn the floor back over to Michael Hodges for closing comments.

Speaker 5

Yeah. Thank you, operator, and thanks to everyone for taking the time to join the call today. Should you have any questions, please do not hesitate to reach out to our investor relations team. This concludes our call. Thank you, and have a great day.

Speaker 7

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.

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