Further Explanation Re Gulfports Quarterly Guidance

Someone, remarkably, equally a answer to the final shipping argued that Gulfport's quarter looked quite expert in addition to wondered what I was seeing that made me thence bearish on the stock.

General observation: it has been widely observed that the unmarried best mensurate of an oil in addition to gas companionship administration is their finding in addition to evolution costs. Warren Buffett has made this observation many times.

Here - from fairly lately - 26 Feb this year - is their guidance for production in addition to working capital missive of the alphabet expenditures for this year.

2014 Guidance

Gulfport continues to gauge total yr 2014 production to hold upwards inwards the arrive at of 50,000 BOEPD to 60,000 BOEPD. Capital expenditures for exploration in addition to production activities inwards 2014 are estimated to hold upwards inwards the arrive at of $675 1000000 to $725 million. Additionally, Gulfport anticipates spending about $225 1000000 to $275 1000000 on leasehold acquisitions inwards the Utica Shale during 2014.

GULFPORT ENERGY CORPORATION

COMPANY GUIDANCE

		Year Ending
		12/31/2014
Forecasted Production (BOE per day)
Utica		44,500 - 54,500
South Louisiana		5,500
Average Daily Oil Equivalent		50,000 - 60,000
Total Equivalent - MMBOE		18.25 - 21.90
Projected Cash Operating Costs per BOE
Lease Operating Expense - $/BOE		$2.00 - $3.00
Transportation, Processing & Marketing - $/BOE		$2.50 - $3.50
Production Taxes - % of Revenue		4% - 6%
General in addition to Administrative - $/BOE		$1.25 - $2.25
Interest - $MM/Quarter		$4.0 - $4.5
Depreciation, Depletion in addition to Amortization per BOE		$21.00 - $24.00
Budgeted Capital Expenditures - In Millions:
Utica		$594 - $634
Southern Louisiana		$66 - $71
Grizzly		$15 - $20
Total Budgeted E&P Capital Expenditures		$675 - $725
Budgeted Leasehold Expenditures - In Millions:		$225 - $275

Quick summary: they intended to pass $675 to $725 1000000 inwards working capital missive of the alphabet expenditures in addition to past times yr goal their time period rates would hold upwards 50-60 yard barrels per day.

From yesterday hither is their guidance:

2014 Guidance

Gulfport currently estimates total yr 2014 average daily production to hold upwards inwards the arrive at of 37,000 BOEPD to 42,000 BOEPD. Capital expenditures for exploration in addition to production activities inwards 2014 are estimated to hold upwards inwards the arrive at of $715 1000000 to $767 million. Additionally, Gulfport anticipates spending about $375 1000000 to $425 1000000 on leasehold acquisitions inwards the Utica Shale during 2014.

GULFPORT ENERGY CORPORATION

COMPANY GUIDANCE

		Year Ending
		12/31/2014
Forecasted Production (BOE per day)
Utica		31,500 - 36,500
South Louisiana		5,500
Average Daily Oil Equivalent		37,000 - 42,000
Total Equivalent - MMBOE		13.51 - 15.33
Projected Cash Operating Costs per BOE
Lease Operating Expense - $/BOE		$3.50 - $4.50
Transportation, Processing & Marketing - $/BOE		$3.50 - $4.00
Production Taxes - % of Revenue		4% - 6%
General in addition to Administrative - $/BOE		$1.50 - $2.50
Interest - $MM/Quarter		$4.0 - $4.5
Depreciation, Depletion in addition to Amortization per BOE		$21.00 - $24.00
Budgeted Capital Expenditures - In Millions:
Utica		$634 - $676
Southern Louisiana		$66 - $71
Grizzly		$15 - $20
Total Budgeted E&P Capital Expenditures		$715 - $767
Budgeted Leasehold Expenditures - In Millions:		$375 - $425

We at nowadays intend to pass to a greater extent than - $715 to $767 1000000 - that is to a greater extent than - in addition to nosotros intend to make exclusively 37-42 yard barrels per twenty-four hours - substantially less.

They equally good conception to pass to a greater extent than on buying additional leasehold. Historically they accept purchased all this leasehold from related parties.

So far the companionship has had many working capital missive of the alphabet raises based on considerably to a greater extent than bullish guidance.

Influenza A virus subtype H5N1 considerable amount of the coin raised has injure upwards inwards the hands of Gulfport's related parties equally per the related political party controversy quoted below.

Are you lot comfortable?




John


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Related Party Transactions in addition to Relationships

We contract alongside Athena Construction, L.L.C., or Athena, to supply barge services inwards our West Cote Blanche Bay in addition to Hackberry fields located along the Louisiana Gulf Coast. During 2013, nosotros paid Athena $5.2 1000000 in addition to owed an additional $1.0 1000000 for such services at December 31, 2013.

Caliber Development Company, LLC, or Caliber, provides edifice maintenance services for our headquarters inwards Oklahoma City, Oklahoma. We equally good lease portion infinite from Caliber. During 2013, nosotros paid Caliber $175,000 in addition to owed $43,000 equally of December 31, 2013.

We ain a 24.9999% involvement inwards Grizzly Oil Sands ULC, or Grizzly, a Canadian unlimited liability company, through our wholly owned subsidiary Grizzly Holdings, Inc. The remaining interests inwards Grizzly are owned past times Grizzly Oils Sands Inc. As of December 31, 2013, Grizzly had about 830,000 acres nether lease inwards the Athabasca in addition to Peace River oil sands regions located inwards the Alberta Province nearly Fort McMurray. On October 5, 2012, nosotros entered into an understanding alongside Grizzly inwards which nosotros committed to brand monthly payments from Oct 2012 to May 2013 inwards the aggregate amount of about $8.5 1000000 to fund our proportionate percentage of the structure in addition to evolution costs of the Algar Lake facility. We equally good agreed to fund our proportionate percentage of whatsoever unfunded cost overruns inwards excess of $2.0 million. During 2013, nosotros paid an aggregate of $33.9 1000000 nether this understanding in addition to inwards cash calls.

We accept a 25% ownership involvement inwards Muskie Proppant LLC, or Muskie (formerly known equally Muskie Holdings LLC). Muskie processes in addition to sells sand for usage inwards hydraulic fracturing past times the oil in addition to natural gas manufacture in addition to holds sure as shooting assets, existent estate in addition to rights inwards a lease roofing solid soil inwards Wisconsin that is prospective for mining oil in addition to natural gas fracture flat sand. During the yr ended December 31, 2013, nosotros paid $2.2 1000000 inwards cash calls, increasing our total cyberspace investment inwards Muskie to $7.5 million. We equally good entered into a loan understanding alongside Muskie effective July 1, 2013, nether which nosotros accept loaned Muskie $0.9 million. Interest accrues at the prime number charge per unit of measurement plus 2.5%. The loan has a maturity engagement of July 31, 2014. At December 31, 2013, the outstanding remainder of the loan was $0.9 million.

During 2011, nosotros invested inwards Bison Drilling in addition to Field Services LLC, or Bison. Bison owns in addition to operates drilling rigs. During the yr ended December 31, 2013, nosotros paid $2.3 1000000 inwards cash calls. We entered into a loan understanding alongside Bison effective May 15, 2012, nether which Bison may borrow funds from us. Interest accrues at LIBOR plus 0.28% or 8%, whichever is lower, in addition to is to hold upwards paid on a paid-in-kind footing past times increasing the outstanding remainder of the loan. The loan has a maturity engagement of January 31, 2015. We loaned Bison $1.6 1000000 during the get-go ix months of 2012, all of which was repaid past times Bison during the tertiary quarter of 2012. We accept made no loans to Bison since that time.

During the get-go quarter of 2012, we, Windsor Ohio LLC, or Windsor Ohio, in addition to Rhino Energy LLC formed Timber Wolf Terminals LLC, or Timber Wolf. We currently accept a 50% involvement inwards Timber Wolf in addition to paid $0.1 1000000 inwards cash calls during 2013. Timber Wolf was formed to operate a crude/condensate terminal in addition to a sand transloading facility inwards Ohio.

During the get-go quarter of 2012, nosotros purchased a 22.5% ownership involvement inwards Windsor Midstream LLC, or Midstream, at a cost of $7.0 million. Midstream owns a 28.4% involvement inwards Coronado Midstream LLC (formerly known equally MidMar Gas LLC), a gas processing found inwards West Texas. During the yr ended December 31, 2013, nosotros paid an immaterial amount inwards cyberspace cash calls.

During the mo quarter of 2012, nosotros in addition to Windsor Ohio formed Blackhawk Midstream LLC, or Blackhawk. We are the manager of Blackhawk in addition to accept a 50% ownership interest. Blackhawk coordinates gathering, compression, processing in addition to marketing activities for us inwards connectedness alongside the evolution of our Utica Shale acreage. During the yr ended December 31, 2013, nosotros paid $0.7 1000000 inwards cash calls to Blackhawk. On January 28, 2014, Blackhawk unopen on the sale of its equity involvement inwards Ohio Gathering Company, LLC in addition to Ohio Condensate Company, LLC for a purchase cost of $190.0 million, of which $14.3 1000000 was placed inwards escrow. We received $84.8 1000000 inwards cyberspace proceeds from this transaction.

Panther Drilling Systems, LLC, or Panther, performs directional drilling services for the Company. During the yr ended December 31, 2013, nosotros were billed $12.6 1000000 for these services and, at December 31, 2013, nosotros owed Panther about $1.8 million.

Redback Directional Services, LLC, or Redback, provides whorl tubing in addition to time period dorsum services for the Company. Redback billed us $0.1 1000000 for these services during the yr ended December 31, 2013, in addition to no amounts were owed to Redback at December 31, 2013.

Effective April 1, 2010, nosotros entered into an expanse of usual involvement understanding alongside Windsor Niobrara LLC, or Windsor Niobrara, to jointly larn oil in addition to gas leases inwards Northwest Colorado for the role of exploring, exploiting in addition to producing oil in addition to gas from the Niobrara Formation. The understanding provides that each political party must offering the other political party the correct to participate inwards such acquisitions on a 50/50 basis. The parties equally good agreed, dependent area to sure as shooting exceptions, to percentage third-party costs in addition to expenses inwards proportion to their respective participating interests in addition to pay sure as shooting other fees equally provided inwards the agreement. In connectedness alongside this agreement, nosotros in addition to Windsor Niobrara equally good entered into a evolution agreement, effective equally of April 1, 2010, pursuant to which nosotros in addition to Windsor Niobrara agreed to jointly educate the contract area, in addition to nosotros agreed to deed equally the operator nether the price of a articulation operating agreement. As operator, nosotros are responsible for daily operations, monthly functioning billings in addition to monthly revenue disbursements for these properties. For the yr ended December 31, 2013, nosotros billed Windsor Niobrara $0.9 1000000 and, at December 31, 2013, Windsor Niobrara owed us an immaterial amount for these services.

Windsor Ohio participated alongside us inwards the acquisition of sure as shooting leasehold interests inwards acreage located inwards the Utica Shale inwards Ohio. We are the operator of this acreage inwards the Utica Shale. As operator, nosotros are responsible for daily operations, monthly functioning billings in addition to monthly revenue disbursements for these properties. For the yr ended December 31, 2013, nosotros billed Windsor Ohio about $73.4 1000000 for these services. At December 31, 2013, Windsor Ohio owed us about $1.6 1000000 for these services.

In Feb 2013, nosotros entered into a purchase in addition to sale understanding alongside Windsor Ohio pursuant to which Windsor Ohio agreed to sell to us about 22,000 cyberspace acres representing 100% of its right, championship in addition to involvement inwards in addition to to sure as shooting leasehold interests inwards the Utica Shale inwards Eastern Ohio for about $220.4 million, dependent area to sure as shooting adjustments. This transaction, which unopen on February 15, 2013, excluded Windsor Ohio’s involvement inwards xiv existing wells in addition to xvi proposed time to come wells together alongside sure as shooting acreage surrounding those wells. Through this transaction, nosotros acquired an additional about 16.2% involvement inwards our Utica Shale leases, increasing our working involvement inwards the acreage to 93.8%. All of the acreage included inwards this transaction was nonproducing at the fourth dimension of the acquisition in addition to nosotros are the operator of all of this acreage, dependent area to existing evolution in addition to operating agreements betwixt the parties. Pending the completion of championship review afterwards the closing, about $33.6 1000000 of the purchase cost was placed inwards an escrow account. In May 2013, the escrow accounts for both this acquisition in addition to a prior acquisition alongside Windsor Ohio that was completed inwards Dec 2012 were terminated, in addition to an aggregate of $10.0 1000000 was returned to us. The $77.5 1000000 remainder of the escrow accounts was disbursed to Windsor Ohio based on the results of championship review. The transaction was approved past times a particular commission of our board of directors, which engaged independent counsel in addition to fiscal advisors to aid alongside its review.

Mr. Mike Liddell, our onetime Chairman of the Board in addition to i of our named executive officers during 2013, is the operating fellow member and/or an officeholder of each of Windsor Niobrara, Windsor Ohio, Windsor Midstream, Athena, Panther, Redback, Timber Wolf, Bison in addition to Caliber in addition to holds a 10% participation involvement inwards Windsor Ohio in addition to a at nowadays or indirect contingent participation or profits involvement ranging from 2.5% to 10.0% inwards Windsor Niobrara, Athena, Redback, Caliber, Windsor Midsteam, Muskie, Bison, Panther in addition to Grizzly Oil Sands Inc., none of which interests are dilutive to the interests, if any, that nosotros handgrip inwards such entities.