Firefly Value Partners Sends Letter to Gulfport Energy Corporation Board of Directors
Encouraged by Gulfport’s 2019 capital plan – adopted after
Firefly’s significant private and public engagement – and expects its
successful execution to create stockholder value
Calls on Gulfport to – over the course of 2019 – urgently
implement new capital and operational plan, better align executive
compensation with interests of all stockholders, and refrain from equity
issuances
Will continue to build on initial successful engagement with
Gulfport Board to advocate for best interests of long-term stockholders
– including taking steps to refresh the Board should the Company fail to
execute on key initiatives
Firefly Value Partners, LP (“Firefly” or “we”), which manages funds
that, together with affiliates, collectively beneficially own 8.1% of
the outstanding common stock of Gulfport Energy (“Gulfport” or the
“Company”) (Nasdaq: GPOR), today issued a public letter to the Gulfport
Board of Directors (“the Board”).
The full text of the letter is below.
March 6, 2019
Board of Directors
Gulfport Energy Corporation
3001 Quail
Springs Parkway
Oklahoma City, OK 73134
Dear Members of the Board,
Firefly Value Partners, LP (“Firefly” or “we”) manages funds that,
together with affiliates, collectively beneficially own 8.1% of the
outstanding common stock of Gulfport Energy (“Gulfport” or the
“Company”).
As a long-term Gulfport investor, we are encouraged by the Company’s
2019 capital plan, which effectively adopted the share repurchase plan
that we recommended in our extensive private communications with the
Company and our January 17th public letter to the Board of Directors
(the “Board”). We expect the successful execution of the plan to create
value for all stockholders, and we look forward to the Company acting
decisively to exploit the market’s current misunderstanding of
Gulfport’s intrinsic value.
Despite this first step, Gulfport still has a lot of work to do to
regain investor trust and set the Company on a path to maximizing value
for stockholders. As we outlined in our January 17th letter to the
Board, Gulfport has made several capital allocation missteps, including
issuing large amounts of equity five times since 2013—each time at
successively lower prices. Long-term investors have endured the massive
underperformance of Gulfport’s shares—relative to both Gulfport’s peer
group and the broader market—over the last one, three, and five-year
periods. This is particularly frustrating given the Board’s low combined
stock ownership: less than 0.2% of the Company.
We continue to believe that the addition of meaningful stockholder
representation to the Board is the best way to ensure alignment between
the Board and stockholders. However, we do not believe that a
distracting proxy fight to accomplish that end is the best course of
action at this time. Rather, we think it is in stockholders’ best
interest to allow Gulfport’s new CEO the time and focus to address the
issues that contributed to Gulfport’s underperformance.
We believe that in order to address the concerns of long-term
stockholders, Gulfport and its Board must take the following actions in
2019:
-
Implement the capital and operational plan announced on January
17th, 2019, including executing the $400M share buyback plan with
urgency.
-
Set short-term and long-term executive compensation incentives that
are more closely aligned with the best interests of all stockholders.1
-
Abstain from equity issuances.
While Gulfport’s 2019 capital plan is an important step in the right
direction, one in a row is not enough. Given the success of our initial
engagement in helping the Board crystallize a stockholder-friendly 2019
capital plan, we will continue to advocate for long-term stockholders’
interests. If the Company does not accomplish the three goals
articulated above, we believe the Board’s composition will need to
change.
Sincerely,
Firefly Value Partners, LP
About Firefly Value Partners, LP
Founded in 2006, Firefly is an investment partnership focused on
fundamental primary research and business analysis. Firefly invests with
a long-term time horizon in a concentrated portfolio of deeply
undervalued companies.
_____________________________
1 As late as 2017,
Gulfport included no compensation targets tied to per-share metrics.
After input from Firefly and other stockholders, Gulfport added some
per-share metrics in 2018’s short-term incentive program. Short-term
incentives still have room to improve, and long-term incentives still
need to be tied to stockholder-aligned metrics.
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