Liquids-focused driller Gulfport Energy Corporation (NASDAQ:GPOR)
is a very interesting energy company
. Unlike most North American production companies, Gulfport doesn't produce a lot of natural gas. In fact, last year 93% of its production was oil and NGLs, which provide the company with high-margin cash flow. Investors are starting to take notice and the stock has more than doubled over the past year. However, I see three very compelling reasons to own Gulfport.
Very oily production
As I mentioned, 93% of Gulfport Energy Corporation (NASDAQ:GPOR)'s production last year consisted of oil and NGLs. That's very impressive when you consider that most producers would love it if just half of their production were liquids. For perspective, despite investing heavily to grow its liquids production, 74% of Chesapeake Energy Corporation (NYSE:CHK)
's production is still natural gas. Even Devon Energy Corp (NYSE:DVN)
's natural gas production is still more than half at 59% despite double-digit oil production growth.
Gulfport Energy Corporation (NASDAQ:GPOR) produces oil and NGLs from a diverse portfolio of assets including the Canadian oil sands, the Utica Shale, Louisiana and the Permian Basin through its 21.4% ownership interest in Diamondback Energy Inc (NASDAQ:FANG)
. In the year ahead, Gulfport expects to produces 21,370 to 22,192 barrels of oil equivalent per day, which is growth of more than 200% over last year. The company has a visible path to further liquids rich production growth with several opportunities for additional upside across its portfolio.
Rock-solid balance sheet
Because Gulfport Energy Corporation (NASDAQ:GPOR) has been focused on high-margin liquids, its balance sheet is very strong. The company has $226 million in cash and just $299 million of it in debt to go with an undrawn credit facility. For a company with a market capitalization of just under $4 billion, those are very strong numbers. For perspective, Devon Energy Corp (NYSE:DVN)'s net debt to capital ratio is one of the best at 22%. Meanwhile, Gulfport has virtually no leverage, which is nearly unheard of in the industry. That strength will go a long way in helping the company fully develop its oil sands assets as well as its position in the Utica.
Utica sweet spot
While the Utica is loaded with potential, it has not developed into the top-tier oil play
that Devon Energy Corp (NYSE:DVN) and Chesapeake Energy Corporation (NYSE:CHK) had hoped. That's caused Devon to decide to exit its position in the play while Chesapeake is looking to reduce its position. Gulfport Energy Corporation (NASDAQ:GPOR), on the other hand, has found the best spot in the play and is increasing its acreage. That's no surprise when you consider that its first 14 wells averaged an initial rate of 3,055 barrels of oil equivalent per day. While those wells were certainly more gassy than expected, Gulfport sees the Utica as a catalyst to substantially increase its production and reserves.