Gulfport Energy Corporation 2026 Q2 Earnings Call

You may begin. Thank you, good morning.

Welcome to Gulfport Energy Corporation's second quarter 2026 earnings conference call. I am Jessica Antle, Vice President of Investor Relations. With me today is Nick Dell'Osso, Michael Hodges, and Matthew Rucker. Then we'll open up the teleconference for Q&A. I would like to remind everybody that during this conference call, the participants may make certain forward-looking statements. Actual results and 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. We may reference non-GAAP measures. Please refer to the most recent earnings release and investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.

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 Nick.

Good morning, thank you for joining our call, which is my first as CEO of Gulfport. I thought I'd start out with a few comments about why I'm excited to join this company at this time. Gulfport has a great asset base in dynamic regions with rapidly growing gas demand, has a strong balance sheet, and a competitive cost structure. Gulfport's team is highly talented and motivated, the board is experienced and knowledgeable across multiple disciplines and well-suited to guide the company to additional value creation. Like most companies, Gulfport is far from perfect today. With our assets, team, and geographic exposure to growing demand, I believe is uniquely positioned for significant value creation for shareholders for many years to come. The most important factors to creating value for an E&P company are straightforward and well documented.

Have a deep inventory of high rate of return drilling opportunities, highly efficient operational execution, low operating costs, and low financial leverage. Gulfport has largely been on the path to succeed on all of these fronts, with significantly improved operating performance over the last three years and considerable success in inventory expansion through off the ground leasing, new development delineation, and proving up the Ohio Marcellus development opportunities in the portfolio. The recent success in the state lands auction and our announcement today of $140 million budget for discretionary land purchases in 2026 are two great highlights of high-quality inventory growth. That said, I believe we can continue to improve operational and capital efficiency through tighter drilling and completion execution, and improved planning to mitigate risks outside of our direct operational control.

At our best, we compete with anyone in the basin. I think with the right approach and a focus on data and planning, we can make every point of execution best in class. We can also continue to strengthen and deepen our inventory by improving returns on locations we already own with more efficient execution and adding quality leasehold when and where returns are attractive, inclusive of acreage acquisition costs. Our balance sheet is strong today, and we will maintain a conservative mid-cycle leverage ratio. We will support that balance sheet with hedges that seek to protect the capital at risk in our drilling program at all times and remain flexible to hedge more when prices are materially above mid-cycle levels. Delivering better and more consistent results for shareholders will be our number one priority.

You will hear our team focus on our foundation of safe and environmentally sound operations, execution efficiency, cash flow competitiveness, drilling inventory expansion, and downstream market access. Given the macro dynamics of growing in-basin demand for natural gas and to power AI data centers, we should stay focused on these crucial elements of competitiveness to create levers for future growth as demand materializes. As we look to best position Gulfport in this strong market, we are fortunate to have a business that is generating significant free cash flow and is therefore ready to fund opportunities to create additional value. Ongoing effective capital allocation represents the most important decision for us as a management team and board to get right to maximize the value we can create.

Capital allocation must be competitive. We will define the terms of competition around creating the highest financial returns and advancing our strategic goals of improving execution, deepening and strengthening inventory, lowering our breakevens, opening additional or higher value market access, maintaining a strong balance sheet, and returning capital to shareholders. We will look at all of our activity and capital allocation decisions through this lens and optimize outcomes for shareholders as we consider drilling capital spend, investments in operating efficiency, new leaseholder acquisitions, and shareholder buybacks. We recognize every dollar of free cash flow has competing uses. The resulting tension in capital allocation allows us to consistently optimize the opportunities that create the greatest long-term value for shareholders. We firmly believe this capital allocation model, combined with consistent industry-leading execution, will drive improved returns and cash flow on a per-share basis.

In the near term, we have great momentum going into the second half of 2026. Our production is accelerating following our first half of the year capital program. In particular, our liquids volumes will be more than 50% higher than the first half of 2026. Additionally, we are looking forward to executing on our discretionary leasehold budget, which when combined with the recent acreage purchase from the state land auction, increases our net Appalachia location count by approximately 20%. Before we conclude, I want to recognize and thank Michael Hodges for his support during this transition and for his many contributions to Gulfport. Michael leaves the company in a position of financial strength, and I appreciate the role he has played in helping build the foundation we have today.

After many years of service and spending considerable time on the road between Dallas and Oklahoma City, Michael has chosen to devote more time to his family. We all understand and appreciate the need to make this decision. We thank him for his leadership and wish him and his family the very best in the future. This company has all the tools needed to create significant shareholder value and grow our share price. I am very much looking forward to working with all the talented Gulfport employees to prudently and methodically execute on our strategy and position this company for industry-leading returns for many years to come. Operator will now open up the call for questions.