Executive Summary / Key Takeaways

• Gulfport Energy is executing a strategy centered on operational efficiency, financial strength, and returning capital, positioning itself for accelerated free cash flow generation, particularly in an improving natural gas market.
• Recent results, including Q1 2025 performance exceeding internal expectations and robust adjusted free cash flow generation, underscore the effectiveness of cost controls, efficiency gains, and a differentiated marketing portfolio.
• A strategic pivot towards liquids-rich development in the Utica and Marcellus, supported by accretive inventory additions and validated by strong early well results, is expected to significantly enhance margins and contribute to forecast liquids production growth exceeding 30% in 2025.
• The company maintains a strong balance sheet with low leverage and ample liquidity, providing flexibility for capital allocation, including a steadfast commitment to returning substantially all adjusted free cash flow (excluding discretionary acreage) through common stock repurchases.
• Operational efficiency improvements, including record-setting drilling and completion metrics, are driving down costs, reducing future maintenance capital requirements, and enhancing the economic viability of the development program.

A Foundation of Efficiency and Strategic Evolution

Gulfport Energy Corporation stands as an independent exploration and production company with core operations rooted in the prolific Appalachia Basin of eastern Ohio, targeting the Utica and Marcellus formations, and the Anadarko Basin of central Oklahoma, focusing on the SCOOP Woodford and Springer plays. The company's strategic blueprint is clear: develop its high-quality assets responsibly, generate sustainable cash flow, enhance margins through operational and market efficiencies, and deliver value back to shareholders. This strategy is built upon a foundation laid following its emergence from voluntary reorganization in May 2021, which instilled a focus on financial discipline and optimizing its asset base.

Within the competitive landscape of U.S. E&P, Gulfport operates alongside larger players like EQT (EQT) and Chesapeake Energy (CHK) in Appalachia, and Devon Energy (DVN) and Continental Resources in the Anadarko Basin. While these larger competitors often benefit from greater scale and potentially lower operating costs per unit due to integrated operations, Gulfport differentiates itself through targeted regional expertise, a growing focus on environmental stewardship, and a strategic emphasis on dynamically allocating capital to the highest-return opportunities within its diverse portfolio. For instance, while some peers may lead in overall production scale or M&A-driven growth, Gulfport highlights its ability to achieve significant operational efficiencies and cost reductions through focused execution within its core areas. The company's strategic connectivity to diverse and premium markets, including firm transportation to the Gulf Coast, also provides a competitive edge in realizing favorable pricing compared to some basin-constrained peers.

A critical component of Gulfport's operational strategy and a key differentiator lies in its continuous pursuit of technological and execution excellence in drilling and completions. The company consistently deploys leading techniques aimed at maximizing reservoir contact and optimizing hydrocarbon recovery. This includes implementing a "managed pressure" production approach, particularly in its Utica dry gas wells, which is designed to yield higher cumulative recoveries over an extended period, reduce upfront capital requirements, lengthen production plateaus, and shallow decline rates. This approach also contributes to lower lease operating expenses, reduced water recovery, and less impact on offset legacy production.

The tangible benefits of this operational focus are quantifiable. In Q1 2025, the company reported a 28% improvement in Utica drilling footage drilled per day compared to full year 2024 averages, and spud-to-rig release days decreased by over 30%. Completion teams have also set new records for continuous pumping performance in the Northeast. These efficiencies directly translate into lower capital costs per well. Management forecasts its 2025 Utica per well cost to be below $900 per foot of lateral, representing approximately a 10% reduction from full year 2024 levels. These operational advancements are not merely incremental improvements; they are fundamental drivers of enhanced project economics, contributing directly to improved margins, stronger cash flow generation, and a more competitive cost structure relative to peers who may not achieve the same level of localized execution efficiency.

Performance Reflecting Strategic Shifts

Gulfport's recent financial and operational performance provides a clear picture of its strategy in action. Q1 2025 results exceeded internal expectations, demonstrating solid execution despite a dynamic commodity price environment. The company reported total net production averaging 929.3 MMcfe per day.

Revenue performance in Q1 2025 saw natural gas sales reach $281.5 million, oil and condensate sales $31.3 million, and NGL sales $30.8 million, before the impact of derivative instruments. The increase in natural gas sales compared to Q1 2024 was primarily driven by a significant 76% increase in realized natural gas prices, partially offset by a 15% decrease in sales volumes. Oil and condensate sales saw a substantial 57% increase in volumes, primarily from new wells targeting the Utica liquids window, although realized prices decreased by 8%. NGL sales benefited from a 12% increase in realized prices, despite a slight 2% decrease in volumes. The company's derivative portfolio, while resulting in a $146.5 million net loss on derivatives in Q1 2025 due to changes in forward curves, played a role in managing price risk.

Operating expenses per unit in Q1 2025 saw lease operating expenses increase to $0.24 per Mcfe (from $0.18 in Q1 2024), attributed mainly to higher water hauling, labor, and winter weather costs. Transportation, gathering, processing, and compression costs also rose to $0.99 per Mcfe (from $0.90), primarily due to a higher proportion of liquids sales and lower total production volumes. Conversely, depreciation, depletion, and amortization decreased to $0.78 per Mcfe (from $0.83), reflecting a lower depletion rate influenced by 2024 full cost ceiling test impairments and decreased production. Despite some per-unit cost increases influenced by mix and seasonal factors, management anticipates per-unit operating costs to decline throughout 2025 as production volumes accelerate and fixed charges are spread over a larger base.

Financially, Gulfport generated $177.3 million in operating cash flow and $36.6 million in adjusted free cash flow in Q1 2025. This cash generation more than funded the quarter's capital expenditures, which were weighted heavily to the first half of the year. The company's balance sheet remains robust, with trailing 12-month net leverage at approximately 0.9 times exiting Q1 2025. Liquidity stood at $906.5 million as of March 31, 2025, supported by cash on hand and availability under its Credit Facility. The Credit Facility, reaffirmed at a $1.1 billion borrowing base and $1.0 billion in elected commitments in May 2025, provides significant financial flexibility. Recent debt management actions, including the Q3 2024 tender for 2026 Senior Notes and issuance of 2029 Senior Notes, have successfully extended maturities and reduced interest costs, further strengthening the financial position.

Strategic Pivot and Future Outlook

A key element of Gulfport's current strategy is the deliberate pivot towards increasing liquids-rich development. This is driven by the attractive economics and higher margins offered by its Utica condensate/lean condensate and Marcellus acreage. The success of the Cage development in Southwest Harrison County, Ohio, provides compelling evidence for this strategy. Early production rates from the Cage pad have been exceptionally strong, nearly double those of the nearby Lake VII pad, reflecting successful optimization of completion designs, facility infrastructure, and flowback strategies based on learnings from prior development. Similarly, the Hendershot Marcellus pad continues to show encouraging results, with forecasted oil EURs placing these wells among the top performers in the Marcellus oil window.

This strategic shift is clearly reflected in the company's 2025 development plan. While total equivalent production is expected to remain relatively flat compared to 2024, the mix will change significantly. Gulfport forecasts over 60% of its total turn-in-lines in 2025 will be liquids-rich weighted, a notable increase from approximately 37% in 2024. This is projected to result in liquids production (oil + NGL) increasing by over 30% year-on-year, reaching a range of 18.0 to 20.5 thousand barrels per day. The capital program for 2025 is guided at $335 million to $355 million for operated drilling and completion activities, with an additional $35 million to $40 million allocated to maintenance leasehold and land investment.

The company's planning flexibility is also evident in the recent adjustment to the second half of 2025 drilling schedule, prioritizing a four-well dry gas Utica pad and deferring a Marcellus pad to 2026. This move aligns with management's constructive outlook for natural gas prices in 2026 and aims to accelerate cash flows by positioning the company for meaningful natural gas production growth throughout 2025 and into year-end.

Management forecasts significant growth and acceleration in adjusted free cash flow over the coming quarters, driven by the rising natural gas curve, continued operational improvements, and the more efficient capital program. This is expected to further enhance Gulfport's already competitive free cash flow yield relative to its peers. The company also anticipates a reduction in maintenance leasehold and land spend to approximately $45 million in 2025, a 25% decrease from the high end of 2024 guidance, further supporting free cash flow generation.

Shareholder Returns and Risk Considerations

A cornerstone of Gulfport's strategy is its commitment to returning capital to shareholders. The company does not currently pay a common stock dividend but has a robust share repurchase program authorized up to $1 billion through December 31, 2025. Gulfport's framework dictates that substantially all adjusted free cash flow, excluding discretionary acreage acquisitions, will be allocated to common stock repurchases. In Q1 2025, the company repurchased 340,664 shares for $60 million. Since the program's inception, approximately 5.9 million shares have been repurchased for $644.1 million at a weighted average price of $108.99 per share, significantly reducing the share count at prices well below current market levels. Management views share repurchases as a compelling use of capital, particularly when the stock is perceived as undervalued, and maintains an opportunistic approach to these buybacks.

While the outlook is positive, investors should be mindful of potential risks. Commodity price volatility remains a primary concern, directly impacting revenues and cash flows, although the company uses derivative instruments to mitigate a portion of this exposure. Regulatory uncertainty, including potential shifts in U.S. energy policies and ongoing environmental proceedings (such as USEPA allegations related to Clean Air Act violations), could affect operations and costs. Litigation risks, including lawsuits related to alleged trespass and royalty payments, also present potential liabilities. Broader economic conditions, influenced by factors like tariffs and trading relationships, could impact costs and market access. Finally, counterparty credit risk associated with derivative instruments is a consideration, although managed through diversification and credit monitoring.

Conclusion

Gulfport Energy is executing a focused strategy that leverages operational excellence and financial discipline to enhance shareholder value. The company's ability to consistently drive down costs and improve efficiencies, coupled with a strategic pivot towards high-margin liquids-rich development, positions it for accelerating free cash flow generation. Supported by a strong balance sheet and a clear commitment to returning capital through share repurchases, Gulfport offers investors exposure to a company actively optimizing its asset base and capitalizing on anticipated improvements in the natural gas market. While commodity price volatility and other industry-specific risks persist, the company's demonstrated execution capabilities, strategic flexibility, and focus on value creation underpin its investment thesis.