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Gulfport Energy: Poor Normalized Free Cash Flow in 2017

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Apr. 6 2018, Updated 2:50 p.m. ET

Gulfport Energy’s normalized FCF in 2017

For 2017, Gulfport Energy (GPOR) had a normalized FCF (free cash flow) of -258%—the second-lowest FCF among the upstream producers we’re tracking. To learn more about our normalized FCF methodology and filtering criteria, read Part 1. In this part, we’ll discuss Gulfport Energy’s FCF and normalized FCF trends.

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Gulfport Energy’s FCF trend

In 2017, Gulfport Energy reported a negative FCF of -$1.8 billion, which is 317% higher compared to Gulfport Energy’s FCF of -$420 million in 2016. In the past four quarters, Gulfport Energy’s quarterly FCF stayed in the negative territory and showed a U-shaped trend. On the quarter-over-quarter basis, Gulfport Energy’s FCF fell further into the negative territory in 1Q17. However, the company’s FCF improved in 2Q17, 3Q17, and 4Q17. In 1Q17, Gulfport Energy reported its lowest FCF ever of -$1.4 billion. The low FCF could be attributed to the acreage acquisition in the South Central Oklahoma Oil Province for $1.9 billion.

Gulfport Energy’s normalized FCF trend

In fiscal 2017, Gulfport Energy’s normalized FCF deteriorated from -124% in 2016 to -258% in 2017. The deterioration in the normalized FCF in 2017 could be due to the steep increase in its capital expenditures. Even though Gulfport Energy’s OCF (operating cash flow) increased from 2016 to 2017, the increase in the company’s capital expenditures outweighed the increase in its OCF.

Gulfport Energy’s OCF increased 103% from $93 million in 2016 to $188 million in 2017. In comparison, Gulfport Energy’s capital expenditures increased 221% from $758 million in 2016 to $2.4 billion in 2017.

From 1Q17 to 4Q17, Gulfport Energy’s quarterly normalized FCF was negative and showed a U-shaped trend. On a sequential basis, Gulfport Energy’s normalized FCF deteriorated in 1Q17 and improved in 2Q17. In 2H17, Gulfport Energy reported an improving but negative quarterly normalized FCF.

Stock performance in 2018

YTD (year-to-date) in 2018, Gulfport Energy stock has fallen 24.3%. So far in 2018, Gulfport Energy stock underperformed the First Trust Natural Gas ETF (FCG), which represents an index of energy stocks that derive a substantial portion of their revenues from natural gas exploration and production. YTD in 2018, FCG has fallen 11.8%, while natural gas (UNG) has fallen 8.0%.

Next, we’ll discuss Halcon Resources’ (HK) FCF trends.

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