Greetings, and welcome to the Gulfport Energy Corporation's Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jessica Antle, Director of Investor Relations. Please proceed.

Thank you, and good morning. Welcome to Gulfport Energy Corporation's second quarter 2023 earnings conference call. I’m Jessica Antle. Speakers on today's call include John Reinhart, President and Chief Executive Officer; Michael Hodges, Executive Vice President and Chief Financial Officer and Matthew Rucker, Senior Vice President of Operations will be available for the Q&A portion of today's call. I would like to remind everybody that during this conference call, the participants may make certain forward-looking statements relating to the company’s financial conditions, results of operations, plans, objectives, future performance, and business. We caution you that the actual results 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. Reconciliations to these comparable GAAP measures will be posted on our website. 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 John Reinhart, President and CEO.

Thank you, Jessica and thank you to everyone for listening to our call. I'm pleased to provide highlights today on the company's outperformance in the second quarter with strong well performance and operational cycle times outpacing budget expectations, playing a key role in our quarterly production, operating costs, adjusted EBITDA and capital spend realizations all coming in better than analyst consensus estimates. The strong execution across the board led to positive revisions in our 2023 full year production and operating cost guidance. The company remains focused on delivering disciplined growth, lowering costs, improving operational cycle times and efficiencies and enhancing both asset level and corporate returns, all while maintaining an attractive balance sheet and utilizing our top quartile free cash flow yield to enhance shareholder returns and expand our high quality inventory. All of which positions the company attractively for continued fundamental value improvements. Highlighting the second quarter results, our financial position remains strong despite a volatile commodity market, generating $144.5 million of adjusted EBITDA. The company funded our second quarter capital program within our cash flow and with the front-loaded nature of our 2023 activity behind us, we expect adjusted free cash flow to accelerate in the second half of the year from $59 million in the first half of 2023. Our average daily production totaled 1.039 billion cubic feet equivalent per day ahead of analyst expectations and was driven by the accelerated timing of wells brought online in the quarter, as well as the continued strong performance from our development program. During the second quarter, the company drilled and rig released eight gross wells, seven of which were in the Utica. On the completion side, we completed and brought online 13 gross wells during the quarter, 11 in the Utica and two wells in the SCOOP. We continued…

Thank you, John, and good morning everyone. During the second quarter, the company continued to achieve strong results in almost every area of the business. Net cash provided by operating activities before changes in working capital totaled approximately $134 million during the second quarter, more than funding our capital expenditures, despite the soft gas macro and our accelerated level of activity. We reported adjusted EBITDA of approximately $145 million during the quarter, and as John mentioned, due to our capital program waiting to the first half of the year, reported a slight outspend in adjusted free cash flow of just $4 million for the same period better than analyst expectations driven by our strong production and operating cost performance. With less than 40% of our D&C and maintenance leasehold spending left to occur in 2023 and with an improving commodity price environment expected later in the year, the second half of the year should deliver accelerating adjusted free cash flow that provides a strong tailwind as we enter 2024. Our all-in realized price during the second quarter was $2.76 per Mcfe before the impact of cash settled derivatives and firm transportation. This realized unit price is $0.66 above NYMEX Henry Hub Index price, highlighting the benefit of Gulfport’s diverse marketing portfolio for natural gas and the pricing uplift from our liquids in both of our asset areas. We realized a cash hedging gain of approximately $53 million for the quarter as commodity pricing softened and our hedge books strengthened our cash flow. We believe our hedging position for the remainder of 2023 will provide ample protection should prices remain at or below current levels. Our natural gas price differential before hedges was negative $0.25 per Mcfe compared to the average daily NYMEX settled price during the quarter and driven by…

Thank you. [Operator Instructions] Our first question comes from [indiscernible] with Truist. Please proceed.

Good morning team. On the Marcellus de-risking when you get those results just trying to get an idea of what we should be looking for. Are you expected to make a decision on whether or not to pursue a program there? Or is this more about how many locations that maybe you think you could bring on board?

Yes, Bert. This is John. Appreciate the question and your participation today. We’re pretty excited about as we’ve mentioned it the last couple quarters the potential that the Marcellus development brings. So we’re actually closing out drilling on our second well, and as I noted, looking forward to starting that production here in early Q4. As I would bucket the opportunity set as we look at it, there are very attractive wells just right across the river and to the south. We’ve ran also some early pilot logs and some sidewall cores, and what I’ll tell you is that early results are as expected. So as I would bucket the opportunity set from our perspective, we’re looking to delineate the liquids content to the south and to the northwest to better get a handle on how economic these are and what the pressures are in a production profile might look like to better help us in our midstream discussion. So what would be more of a assessing the productivity of the formation and outline better where we might want to initially prioritize subsequent development? So hopefully that answers your question.

That that does. That’s great. And then the follow-up is just on the prepared commentary. You kind of described the remaining share repurchases as the amount of free cash flow you have for the year. So, obviously 2Q was a lower gas price environment, so maybe you pulled some of that forward. So I just want to make sure we understand, is it a similar program going forward or are you looking at more of a year forward calculation for the year of free cash flow and then you’re just kind of using those buybacks? Or should we expect just a ratable amount of opportunistic share repurchases as they come along? Thanks guys.

Yes. Bert, this is Michael. That’s a great question. So we’ve described this throughout the year as being kind of a full year program. So we look at our 2023 full year available free cash flow. We can kind of look at that every month at where that sits and what we think might be coming, and certainly commodity prices play into that. And then we assess the amount of share repurchases that we feel like we can make once we take into account any of the acreage opportunities that John described this morning. So that can vary from quarter-to-quarter. And certainly we’ve been active buyers throughout the year. We think the equity is extremely attractive at current levels and have felt that way consistently. And so with our healthy balance sheet, with our liquidity on the revolver, we don’t really need to chase kind of quarterly changes in the free cash flow. We look at it on that full year basis. And so as we look out to the second half of the year, we’re still assessing it in that fashion and plan to make additional repurchases as we have the available free cash flow.

I think that’s a great way to go about it. Thanks guys.

Our next question comes from Tim Rezvan with KeyBanc Capital. Please proceed.

Okay. Good morning, everybody. Thank you for taking my questions. As we look out to 2024, if we ignore the sold calls, you look to be roughly 50% hedged, just curious given where the balance sheet is and the sort of operational momentum. Is that a good level where you want to be or would you opportunistically push much higher to like the 2023 level if you saw the strip improve? Just curious on your thoughts there.

Yes, Tim, this is Michael. Another really good question, I think we feel good about where we're at and certainly the hedge position we have in place is significantly in the market or in the positive mark given where the strip sits right now for 2024. You mentioned the balance sheet, I think that gives us the flexibility to vary a little bit, whether we want to be a little higher or a little lower, I would call where we're at somewhere in the middle of our typical range or our typical strategy for our hedge book. So, I think where the strip sits currently, I think we'd feel pretty comfortable with our existing book. If the strip were to move significantly higher, we could certainly layer in a little bit. We probably don't have a ton of room left to add to 2024, but I think for the most part we're really comfortable with where that sits. And I mentioned in my prepared comments, we're really focused on 2025 and we have a pretty optimistic and bullish view on 2025. So we've been using some structures that allow us to keep the upside there. So, I think most of our focus will be on 2025, but if we saw some improvement in the strip for 2024, there's probably a little bit of room where we could do some additional work there.

Okay, I appreciate that color. And next question, follow up maybe more for John. In the investor deck, you're talking about increasing CapEx in Oklahoma next year, sort of minimal CapEx this year, so an increase like trying to understand how material that can be, it's just a couple more wells or as you've learned more about the asset, is there a chance we could see a full-time rig running out there? Just curious, kind of overview on the SCOOP now that you've been in the seat for a few months?

Hey Tim, thanks for participating in the call. I appreciate the question. Listen, we're pretty excited about the SCOOP coming in. Quite frankly, it's highly economic and the economics certainly warrant capital allocation as we talked about it in the prior quarters due to the HBP nature. We did take some funds from that with regards to our capital program in 2023 and really wanted to reinvest that into Marcellus delineation, which we've done. But now as we turn to 2024, again with the really good results, we are going to be allocating more of a historic capital allocation to the Oklahoma SCOOP area. And you can think about that in the neighborhood of that 25% to 30% of the capital range plus or minus moving forward. So we'll put out our guidance, in January for – or early February for the full year. But I can tell you we're pretty excited about kind of getting back to our normal cadence of this highly economic part of our portfolio, so appreciate the question.

Okay, thank you.

Thank you. At this time, I will turn the call back to Mr. John Reinhart, CEO for final remarks.

Yes. Thank you for taking the time to join our call today. Our message has been a consistent one, run a healthy company by maintaining a healthy and attractive balance sheet with moderate growth, minimal levels of commitment and generate substantial free cash flow that is directed towards shareholder value accretion. This allows the company to have many levers to be opportunistic tactically and strategically for further value enhancement in the future. Should you have any questions, please don't hesitate to reach out to our investor relations team in the future. Thanks again for joining our call, and have a great day.

This concludes today's teleconference. You may disconnect your line at this time and thank you for your participation.