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Gulfport Energy takes hit after company downgrades Utica shale production outlook for 2014

Gulfport Energy Corp., the No. 2 player in Ohio’s Utica shale, took a major stock hit on Thursday after company officials lowered its 2014 production outlook and reported weaker earnings for the quarter.

Shares closed up Wednesday at $73.04, a 36.4 percent increase over the last year, but fell 18.7 percent to $59.38 Thursday after the announcement.

The Oklahoma-based energy company reduced growth projections from 385 percent to 250 percent year over year under new CEO Mike Moore.

Gulfport’s confidence in the Utica shale remains “very strong,” he said.

Reasons for the guidance cuts include a new policy by the company on wells to make them produce longer, continued problems in getting collection pipelines and processing facilities built in eastern Ohio and the company delaying well completions so that it can initiate a new and more-efficient well-completion program, Gulfport officials said.

Production will likely be flat through the second quarter and then start to increase, officials said during a conference call with analysts.

The firm estimated production will be in the range of 37,000 to 42,000 barrels of oil equivalent per day, down from its prior view of 55,000. It also lowered its anticipated spending in exploration and production activities to between $715 million and $767 million.

Related: BP pulling back from Utica shale in Valley

It increased its anticipated spending on leasehold acquisitions in the Utica shale to between $375 million and $425 million. It previously estimated it would spend between $225 million and $275 million.

For the period that ended March 31, the company reported earnings jumped to $82.6 million, or 96 cents a share, from $44.6 million, or 61 cents a share a year earlier. On an adjusted basis, the company reported earnings of 20 cents a share. Revenue more than doubled to $118 million.

The Utica shale produced 21,062 barrels of oil equivalents per day in the first quarter 2014 and that could reach 55,000 barrels of oil equivalents per day by December, the company said.

In the first quarter of 2014, Gulfport overall produced 2.4 million barrels of oil equivalents or 27,087 barrels of oil equivalents per day.

That compares to 6,395 barrels of oil equivalents per day in the first quarter 2013 and 16,668 barrels of oil equivalents per day in the fourth quarter 2013.

The company also reported what it called “communication” between horizontal Utica wells in Harrison County with water from one well leaking into another nearby well.

That halted production from the condensate-rich well and it is expected that the affected well will recover from what officials described as a temporary and a minor problem.

Gulfport has signed a new agreement with Ohio-based Murray Energy Co. to lease about 8,000 acres in Belmont and Monroe counties. That project will enable Murray’s coal-mining operations and Gulfport’s well-drilling operations to co-exist in a first in the Utica shale.

Gulfport has quietly leased acreage in the West Virginia Panhandle for future Utica drilling. It has paid about $8,000 to $8,500 per acre.

The company has added about 13,000 Utica acres in Ohio and West Virginia. It has about 179,000 net acres under lease in the Utica shale. It is running seven drilling rigs in Ohio.

Gulfport is now drilling Utica wells in 24 days, about 10 fewer days than when it first drilling in the Utica and means less expense, officials said.

 

Bob Downing can be reached at 330-996-3745 or bdowning@thebeaconjournal.com.

 

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