Crude Oil ( ) Brent Crude ( ) Natural Gas ( ) S&P 500 ( ) PHLX Oil ( )
Current GPOR Stock Info

Increases Net Utica Position to more than 230,000 Acres

Gulfport Energy (ticker: GPOR) made its second sizable acquisition in three months on June 9, 2015, landing 45,163 gross acres (33,426 net) in the Utica Shale from American Energy – Utica, LLC (AEU), a subsidiary of privately held American Energy Partners. The current purchase price is $387.2 million, but a deal for an additional 4,950 gross (net acres) is in place “if AEU completes the acquisition of such acreage within 30 days of the closing of the Monroe acquisition,” says the news release. If the shoe-in asset purchase is completed, GPOR’s total purchase price will be approximately $406.6 million.

Details on its latest deal are listed below (italicized section subject to .

Price (MM) Counties Acres (Net) Production Details
$68.2 Belmont, Jefferson 6,198 0 Undeveloped
$319.0 Monroe 27,228 14.6 Mmcfe/d Includes 18 gross (11.3 net) uncompleted wells, a fully constructed pad and 287 MMcfe/d of takeaway capacity
$19.4 Monroe 1,900   Determined on AEU closing extra interest
$406.6   35,326 14.6 MMcfe/d  

The Belmont and Jefferson properties are bolt-on acquisitions to GPOR’s purchase on April 16, 2015, when the E&P secured 24,000 net nonproducing acres for $300 million. Assuming all transactions close successfully, Gulfport will have acquired nearly 40,000 net acres (75% undeveloped) for approximately $706.6 million. An updated table from a previous article covering Gulfport’s acquisition is listed below.

Comparative Deals in Eastern Ohio

Date Buyer Price (millions) Acres (net) Price/Acre Spot Price at Time of Sale* 3-Year Futures Price*
6/9/15 Gulfport $406.6 35,326 $11,509 $2.84 $3.35
4/16/15 Gulfport $301 24,000 $12,700 $2.68 $3.39
11/5/14 Antero Resources $185 12,000 $15,417 $4.19 $4.08
7/30/14 PDC Energy $35 13,000 $2,692 $3.79 $4.12
6/9/14 American Energy Partners $475 27,000 $17,592 $4.65 $4.29
5/7/14 Antero Resources $95 6,363 $14,930 $4.74 $4.29
2/26/14 Gulfport $185 8,200 $22,560 $4.86 $3.57

*Henry Hub price according to data compiled from Bloomberg

Funding the Deal

The similarities of these deals go beyond the undeveloped acreage and privately held sellers. GPOR is issuing 10 million shares of common stock with an option for an additional 1.5 million shares. Proceeds will be used to fund the purchase of AEU’s assets in addition to general corporate purposes and funding its 2015 capital development plans, which were projected at $561 to $611 million in its Q1’15 release. The company listed $74.7 million in cash on hand for the latest quarter, with $70.5 million outstanding on its $575 million borrowing base.

Following its April acquisition, the company raised $786.4 million with a combination of debt and equity raises. The proceeds paid off the outstanding balance on its credit facility and were intended to fund a portion of its 2015 expenditures.

Pro forma for the acquisitions, Gulfport will hold approximately 262,000 gross leased acres (243,000 net) in the Utica Shale. GPOR believes it has added 350 net drilling locations with its two recent purchases, assuming 160-acre spacing. The latest deal is expected to provide 200 locations. The company was already planning on adding another full time rig in Q1’16. The Monroe acreage has a 10 well per year drilling commitment and is approximately 85% held by production, with a net revenue interest of approximately 84%.

Full-year 2015 guidance, not including the AEU deal, is 432 to 480 MMcfe/d. Firm transportation commitments will reach 1,262 MMcfe/d by year-end 2017.

American Energy Partners Update and the Emergence of Ascent Resources

Aside from some recent notes exchanges across its subsidiaries, this is the first time American Energy Partners has made headlines since its primary investor, Energy & Minerals Group, settled a lawsuit with Chesapeake Energy (ticker: CHK) in April. Shortly after the Gulfport news release, AEU announced the raising of an additional $977 million in debt and equity financing. Furthermore, AEU rebranded itself as Ascent Resources, LLC, and will have $700 million in liquidity after paying off certain existing debt.

AscentResources-logo_whiteThe latest development is yet another interesting twist to a possible disconnect between McClendon and the various investors of American Energy Partners. Earlier this year, Chesapeake alleged McClendon stole confidential land leasing documents and maps prior to his ouster from the company in early 2013. McClendon went on to found American Energy Partners later in the year and has raised more than $14 billion last fall.

Energy & Minerals Group, a sizable stakeholder in AEU, went against McClendon’s will in paying off Chesapeake, which included a payment of $25 million and 6,000 acres in the Utica Shale. American Energy Partners had choice words in a press release.  “Although Mr. McClendon is a director and the single largest non-institutional shareholder in AEU, he did not approve the settlement and neither he nor AELP were advised of the negotiated terms of this settlement,” the release says. McClendon remains mired in a separate, existing dispute with Chesapeake as the owner of the consortium company.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.