Greetings, and welcome to the Gulfport Energy Corporation Second Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jessica Antle, Vice President of Investor Relations.

Thank you, and good morning. Welcome to Gulfport Energy Corporation's Second Quarter 2025 Earnings Conference Call. I am Jessica Antle. Speakers on today's call include John Reinhart, President and Chief Executive Officer; Michael Hodges, Executive Vice President and Chief Financial Officer; and in addition, Matthew Rucker, Executive Vice President and Chief Operating Officer, will be available for the Q&A portion of today's call. I would like to remind everybody that during this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, future performance and business. We caution you that the actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we may reference non- GAAP measures. Reconciliations to the comparable GAAP measures will be posted on our website. An updated Gulfport presentation was posted yesterday evening to our website in conjunction with the earnings announcement. At this time, I would like to turn the call over to John Reinhart, President and CEO.

Thank you, Jessica, and thank you for joining our call today. We're excited to announce several strategic initiatives alongside our second quarter results, highlighting our focus on enhancing the underlying fundamental value of the company and delivering long- term value to our shareholders. First, we are pleased to share our plans to allocate up to $100 million toward discretionary acreage acquisitions in the coming months, securing future drilling opportunities and strengthening our inventory runway in the core of the Utica Shale. The announcement further demonstrates our commitment to identifying, capturing and developing high-quality, low breakeven resources. This level of reinvestment marks Gulfport's highest leasehold spend in over 6 years, bringing our 3-year allocation of discretionary land spending to nearly $200 million. Together with our Marcellus delineation focus, these efforts are cumulatively targeting approximately 6.5 years of incremental inventory runway since the beginning of 2023. Next, we are increasing our share repurchase program authorization by 50% from $1.0 billion to $1.5 billion to facilitate our ongoing investment in our equity. The company opportunistically purchased $65 million of Gulfport common shares during the quarter and has already returned $125 million to our shareholders in the first half of 2025. Finally, our announcement to redeem all of our outstanding preferred stock has the potential to meaningfully accelerate our share repurchase efforts, allowing Gulfport to take advantage of the current undervalued nature of our equity while simplifying our capital structure in a way that is accretive to our key per share cash flow metrics moving forward. We remain committed to upholding our strong balance sheet and the initiatives announced today demonstrate our disciplined capital allocation and the strength of our current and projected financial position. Gulfport delivered a solid second quarter, marked by high single-digit quarterly production growth, strong operating cost performance and consistent…

Thank you, John, and good morning, everyone. Despite a volatile commodity backdrop, our pattern of execution here at Gulfport remained unchanged as we generated more than 70% adjusted free cash flow growth quarter-over-quarter, and we were unwavering in our commitment to return significant value to our shareholders. Net cash provided by operating activities before changes in working capital totaled approximately $198 million during the second quarter, more than funding our capital expenditures and common share repurchases while maintaining our balance sheet strength. We reported adjusted EBITDA of approximately $212 million during the quarter and generated adjusted free cash flow of $64.6 million, bolstered by cash operating costs and capital expenditures coming in better than analyst expectations. With nearly 3/4 of our anticipated full year capital spending complete and a strong hedge book, locking in a significant portion of our revenues for the remainder of the year, we expect adjusted free cash flow to accelerate and financial momentum to increase over the second half of 2025, paving the way for the strategic initiatives that were announced alongside our second quarter results last night. Our all-in realized price for the second quarter was $3.61 per Mcfe, including the impact of cash settled derivatives. This realized unit price is $0.17 above the NYMEX Henry Hub index price, highlighting the benefit of Gulfport's differentiated hedge position, the pricing uplift of our liquids production and our marketing portfolio for natural gas that includes direct access to premium Gulf Coast markets. As many of our peers have discussed, natural gas demand is rising, fueled by LNG expansion and increased power generation needs driven by the expected growth of AI-related infrastructure in the Northeast. This evolving landscape presents exciting opportunities for both Gulfport and our in-basin peers, and we are actively engaging in conversations that would potentially…

[Operator Instructions] Our first question is from Zach Parham with JPMorgan.

First, just wanted to ask on the leasehold spend, which is a little bit higher this year or quite a bit higher this year than what you've done in the last 2 years. Can you talk a little bit more about where you're adding those locations geographically within the Utica and where they'll fit into your development schedule going forward?

Yes, Zach, this is John. Thanks for the question. I think as we look at the cash flow profile of the company in 2025, it's pretty prolific here, especially in the second half of the year. And we certainly have been leaning in on reinvesting back into the company in addition to buying shares. Both are a really good use of cash. With regards to the $75 million to $100 million, that represents, let's call it, 40 to 50 wells that we're targeting. These will be in Belmont County, Ohio and Northern Monroe County. So really adjacent to our current footprint where we can take care of -- take advantage of some midstream synergies and other infrastructure synergies. We're really targeting as far as the quality of acreage, continued focus on low breakeven, high-quality acreage that will move towards the left end of the skyline chart. And given our HBP position of our legacy acreage, that value certainly retains in the company's portfolio. So very happy with the prospects that we've been able to identify out there. We've already kind of got a jump start with $7 million under our belt in Q2. So looking forward to wrapping up the commitments and closure of these high-quality 2-year kind of runway inventory adds.

Maybe one for Michael. Could you talk a little bit more about the mechanics of the preferred stock redemption? How you see that going? Will you just -- if it's all cash redeemed, would you just lean on the revolver in the near term? And maybe also, how do you view buying back stock in the open market at this point when you have this potential big preferred stock redemption in front of you next month?

Yes. Zach, this is Michael. Great question. So I'll start with the first part of that question. So mechanically, we issued the notice last night to the holders of the preferred stock. They have until September 5 in order to make a decision as to whether they would like to convert to common equity or have the company repurchase their shares at the end of that period. And so the price will set towards the end of that period. We'll see what those holders choose to do. Quite frankly, we see it as an acceleration of our existing program. And we -- as I mentioned in my prepared comments, I believe the value of the equity right now presents a pretty exciting opportunity. So obviously, don't have a lot of line of sight to where that will end up. I think this transaction simplifies the capital structure. It eliminates the dividend. So really either way, whether there's conversions to common or a repurchase, there's some embedded benefits to the company there. I think as far -- in terms of financing any of the cash redemptions, we have almost $900 million in liquidity, as you mentioned, leverage is under a turn. So we certainly can lean on the revolver to do that, and we have the flexibility to do it. We actually also have a borrowing base that allows for us to increase the liquidity under the RBL as well. So we'll kind of see where things shake out. And as you mentioned, we've got a lot of free cash flow in the second half of the year. If we see more cash needed on the preferred, we'll adjust accordingly. But we've got a lot of optionality there to continue to be buyers of the equity just depending on how that shakes out. So like I said, long term, we feel like this is a great transaction for Gulfport. It's got a lot of benefits to it, and we'll get back to you guys after that 30-day period with the results of the redemption.

Our next question is from David Deckelbaum with TD Cowen.

Congrats on the quarter. I just wanted to ask, Michael, perhaps just to elaborate a bit on the post redemption world for Gulfport. Your leverage, I guess, would be just under 1 turn. So heading into '26, I guess, how do you think about the allocation of free cash towards shareholders versus deleveraging? Or is -- are we kind of at a comfortable leverage target post the redemption?

Yes. David, great question. I think we've talked in the past about 1x leverage feels right for our company. And from our perspective, that could be 1/10 above, 1/10 below. We don't really differentiate to that level of detail. But I think to your point, I think there's capacity now to absorb the preferred stock redemption in cash. And as we move forward, the cash flow generation into next year will be pretty exciting. I mentioned that in my prepared comments as well. Obviously, we're looking at a pretty strong strip next year. We've got a lot of efficiency gained over the last couple of years on the capital side. So we'll still be generating a lot of free cash flow. I think from a philosophical perspective, I don't think anything has changed. I think we'll still look at opportunities like John went through on the inventory side. If there's opportunities to add high-quality locations, those are extremely attractive, especially when you can turn them into sales as quickly as we have, for example, on this first Northwest Belmont County location this quarter. So those are very attractive to us. And then we'll see how the equity performs. I think we still believe there's a pretty significant opportunity there. Hopefully, that starts to narrow. But as we sit here today, we'd be significant buyers of the equity next year as well. So like I said, unchanged. We feel like this is really an extension of what we've been doing in the last couple of years, just an opportunity for us to lean in a bit here with a singular transaction. So I don't think anything changes in terms of our philosophy going forward.

That's helpful, Michael. And maybe for Matt or John, just the success that we've seen at the Kage pad for managed flowback or pressure management, how do we think about now just the competitive returns of that condensate area, particularly, should we expect to see more activity directed there as a percentage of the portfolio also just given kind of the context of the macro backdrop right now as we head into '26?

Yes. Thanks, David. This is Matt. Yes, we've seen very good results in that area, both at the Lake and the Kage, taking our learnings from the Lake on the Kage, kind of modifying our flowback strategy there. We talked about that on the oil side and the advantages we see there. Listen, it's a strong part of our portfolio. It's still above 70% IRR threshold. It does currently trail in this environment, the other high-quality areas that we have, but it's part of our mix. We like a nice balanced portfolio that we can be pretty flexible in any given calendar year. So we'll continue to watch the commodities and where those go and heading into '26, certainly, at the current moment, we're probably more bullish on the gas side and pivoting around that. But we haven't set those targets yet on the budget side, and we'll continue to work that as we get closer to '26.

Our next question is from Jacob Roberts with Tudor, Pickering, Holt & Company.

I wanted to revisit the discretionary spend. I think in the past, you guys have talked about a willingness to pursue kind of more transformative opportunities. And I hate to call $75 million to $100 million small scale, but is there an implication here that a much larger scale opportunities are unavailable or more unlikely?

I appreciate the question, Jake. No, I wouldn't read into anything. What I'll say is we've been pretty consistent, at least since our arrival here over the past 3 years, where we're going to protect the balance sheet, keep leverage low, increase efficiencies, lower cost and buy shares with the free cash flow and reinvest into the company with additional inventory. So the way I would look at it, it's kind of the same strategy from a lot of different perspectives that has a lot of benefits. But as long as you follow those key tenants, I think that positions you with a very healthy company with a lot of options. So we're very pleased with the prospects we have out there with this organic acquisition program, and we're going to continue to apply cash because it's a very high return and a good use of free cash flow along with buying our undervalued shares.

Great. And then maybe a follow-up sort of to David's question. I wanted to ask about the SCOOP side of the portfolio. I know you've wrapped up the program for the year, but we were just hoping if you could kind of rank that maybe against that 70% IRR you mentioned and how you view the asset against the current commodity backdrop.

Yes. No, I appreciate the question, Jake. Certainly, it is a continued part of our portfolio. We're still at those levels of a pad or 2 a year, nothing firm on '26 yet, but we did turn in line a 2-well SCOOP pad that we mentioned in the first quarter there where we completed activities and some deep Woodford was a little bit of a liquids component there that certainly, from our standpoint, is robust in nature from returns. It does stack up with the Utica. It is a little bit more capital intensive on a per well basis. So we fit that within our portfolio in any given calendar year. But we've always been happy with our returns in the SCOOP. It's a matter of how it fits in our overall budget portfolio and where we allocate capital. So we'll continue to develop in that basin, and we keep an eye as well on just some other strat out there that sits in our inventory that we haven't developed recently. Springer, Sycamore and some of our nearby competitors certainly have continued to delineate that around us, and it's a little bit more liquids heavy of a component, which currently doesn't compete as well with some of the other areas. But those are things we keep an eye on and have the ability, again, to be very diverse and flexible in our development programs.

Our next question is from Carlos Escalante with Wolfe Research.

I guess my first question, I would like to focus on the power contracting momentum that basin has seen recently. So with so much of that going on, I wonder if you can offer any color on any possibility that Gulfport participates in something similar. And a second part to that question, if I may, all else equal, would you choose to grow your volumes or take a better basis once all these new projects create a new in-basin demand sync?

Yes, I'll take the first part of that question, at least initially here, Carlos. I think the answer is yes. I think we will be in a position to participate now. I think if you think about Gulfport relative to some of the other guys that have announced long-term agreements, anchor agreements with large projects, we're probably not of that size and scale, right? So I think we are seeing more inbound interest in finding volumes for those types of projects. I think for us being a SMID-cap that's -- even though our financial health is pristine in my opinion, we're not investment grade. So I think for us, we're likely to work through intermediaries. We're likely to be part of some kind of an aggregation strategy for one of those sources that are looking to build some gas position rather than just supply it entirely ourselves. But I can tell you that just in the last quarter, for example, we've seen significantly more interest in that. And if you think about all that going on, whether you're directly partnered with some of those projects or not, we expect that you'll see rising in-basin prices just alongside of that demand, right? So whether you're directly involved, which we think, again, we likely will be at least on some level, or whether you just see the local basis start to tighten over time as molecules in the basin become more in demand. We think that's a net-net positive for the company. Now for second part of your question, maybe could you ask that again? I'm not sure I completely understood the second part there, Carlos.

Yes. If these projects do come to fruition in basin, whether you participate or not, that will inevitably create either some kind of growth potential or better basis differentials or -- differentials. So just wonder if you had to pick based on your strategy which one would Gulfport feel more comfortable in applying moving forward?

Yes. I mean I think -- and John can jump in if he has additional perspective. But I think for us anyway, we've been fairly consistent with kind of a relatively flat production profile, 0% to 5%. I mean, I think as you look out the forward curve, the macro environment, we believe, is bullish for gas. We think it's improving. On the other hand, it's still got a three handle on it in a number of the out years. For us to project significant growth at those levels is unlikely even with some narrowing basis like you mentioned. So I think there's -- certainly, in my belief, there's an opportunity for that to happen. But I think for Gulfport to significantly change our existing strategy would require some much larger macro move than what we're currently seeing. So maybe I'd say I think we're less likely to grow into that. I think we're more likely to benefit, at least from the way you pose the question from the rising prices and the narrowing differentials over time.

Got you. I appreciate that. And then for my follow-up, I hate to beat the dead horse with the preferred, but can you perhaps walk us in more detail, making a very gross assumption that all your preferred equity owners decide to pursue the buyback option, the immediate buyback option. Assuming that, how do you envision you will treat the preferred equity as soon as it is converted to the common stock and that in the context of your buyback authorization for the second half of 2024?

Yes. Yes. Good question, Carlos. So in that scenario, like I mentioned earlier, the financial leverage for the business is about 0.85x. So we're very low levered. We've got tremendous liquidity available under our RBL. So we would absorb that cash repurchase likely under the RBL would be at least my initial strategy there. Leverage would tick up temporarily. And then if you look at the next 2 quarters of 2025 and into the first part of 2026, there's a lot of free cash flow and EBITDA growth, at least that we forecast based on current prices. So we would be looking then to kind of monitor our free cash flow and adjust accordingly. I think there's opportunities there to continue the share repurchase program, but we would also be targeting around that 1 turn of leverage that I mentioned earlier over the next few quarters. So I think that's the way we would look at it, and we'll just have to make that adjustment once we know the results here in about a month.

Our next question is from Peyton Dorne with UBS.

This is Peyton. I know it's a bit early to lay out the 2026 plan in detail, but I wonder if you could provide a bit more color on the trajectory of volumes to start the year, just given the activity slowdown over this back half of the year.

Yes, Peyton, I appreciate the question. I think if you think about the cadence of the production profile, which is what I believe you're asking about, we're really looking for an uptick in Q3, just call it, around 10% plus or minus in total volumes and relatively flat in Q4 leading into '26. we certainly haven't compiled and communicated '26 guidance. But what I would tell you is we've been very focused on gas and wet gas. And even in the wet gas areas, these have been highly prolific gas-weighted wells, which have certainly a longer- dated plateau period and a staunch year kind of production profile moving forward. So if you think about the cadence kind of ending the year kind of flattish and going into '26, we feel real good about it. And we'll certainly communicate more on the '26 plans as we get those -- the budgets and the forecast lined out here in the beginning of the year.

All right. Great. And then just keeping the theme on the repurchases. Last night and today, one of the themes you highlighted on the preferred redemption was preserving Gulfport's public float and the trading liquidity. And just knowing that strategy, when we think about kind of the capital returns in 2026 and beyond, would you maybe consider instituting a base dividend and not solely relying on buybacks for the returns or changing up the strategy just a bit to maybe preserve that liquidity as we go forward?

It's a great question, Peyton. I appreciate you asking. It's something we certainly monitor as a management team and discuss with our Board of Directors. I think we've had a lot of success with our share repurchase program over the last 3 years. I think if you look back, we're -- like I mentioned in some of my prepared comments, we're more than 30% ahead on a kind of a cumulative investment based on where the stock trades today. So I think we're really satisfied with that. I think the market really likes the consistency of that. I know other folks talk about share repurchases. Gulfport has been very consistent in delivering on that. So I think for us, and you still have to keep in mind, we do have a large shareholder that's sold some blocks in the past, and we think that's a great opportunity for the company to be able to buy those non- floating shares that you were describing as a way to, again, capture equity value. And so I still see that out there potentially on the horizon at some point. So anyway, I think I would say that, yes, we're monitoring it. I think for now, the strategy is probably going to be similar going forward. And certainly, if that changes, we would let you all know. But I think we're really satisfied with the results so far.

Our next question is from Noah Hungness with Bank of America.

I guess for my first question here, I wanted to follow up a bit on Peyton's question on kind of '26 CapEx cadence. Is there -- I know it's too early to get guidance, but just in terms of how it's weighted versus front half and back half, should we think that it's a similar weighting like what we saw this year in '25?

Yes. No, this is John. Appreciate the question. Yes, again, it's pretty early to be commenting on '26. But what I can tell you is that by and large, the company is planning a front-loaded capital program. I would say this year was a little bit exasperated simply because some of the well types that we were drilling, they were very short-cycle wells. So it kind of accelerated even a front-loaded capital program just a little bit more than our historic kind of pace. So -- but somewhere in the -- I don't want to again give some guidance, but I would say somewhere where we landed this year and the last year, probably in the medium point is where I would expect us to land. We like the front-loaded capital program simply because it's very capital efficient. And also last year, we did have the exasperated effects of just having a lot of liquids production, which had a short plateau. So shifting towards gas, it just changes your production profile corporately, and we're going to be very mindful as we put together the '26 plans to be able to capitalize on the different quarterly cadence and make sure that we maximize cash flow for the company.

Great. That's very helpful. And then for my second question, could you just give us any color on how much production is sidelined right now due to some of the lingering midstream constraints? And then once those constraints are alleviated, is it something as simple as you guys can just open up the choke a bit and fill that new capacity?

Yes. This is John. I appreciate that question as well. So with regards to the quantity, what I'll tell you is, as I quoted in my prepared remarks before, the vast majority of these have been mitigated. A lot of the early issues were weather-related kind of plant outages. There was a slip on the side of a hill with a gathering line. We're very pleased with the midstream partners' response, their reactions. They jumped on it. It was mitigated and production in those areas are back up to expected production rates. What I'll tell you is the lingering or ongoing projects that the midstream companies have provided to offset and mitigate some of the production capacity or said another way, the compression adds that they're adding as well as gas quality equipment. Those remain ongoing. And although they're a minority part of the overall downtime, these projects will be completed towards the end of the quarter and into the fourth quarter. And so what we wanted to do was make sure that everybody was calibrated with our low end of the guide range. So that way, you can kind of look at our quarterly uptick in our flat Q4 to narrow in on where our production is forecasted to be considering the cumulative impact of all of those impacts. So very pleased with the midstream providers' responses to these. They prioritized them and jumped on them. And it really did mitigate what could have been a more meaningful impact to the company.

Our next question is from Tim Rezvan with KeyBanc Capital Markets.

I wanted to follow up on Zach's question earlier. I don't believe you directly addressed it. As we think about repurchases this quarter at a time when shares have pulled back significantly along with gassy peers, is there anything like related to an extended blackout window on the preferred redemptions or anything that would keep you from doing your normal pace of repurchases this quarter, and that would include maybe wanting to wait until you get notice on the preferreds. Just trying to understand kind of any moving parts there.

Yes. Tim, it's Michael. I mean, I think to answer your question, there's always things we have to be aware of, and there's also ways to work through those things. So there's opportunities where we can put plans in place ahead of windows and protect the company from that perspective. So I think, yes, is the answer to your question, there are ways that we can still work through common share repurchases even when we have these other transactions going on. And we also are being mindful of kind of what this redemption results in from a cash perspective. And so as we get that information later in the quarter, we should be able to then toggle our own intentions from that point forward. So I think the answer to both your questions is yes, there's opportunities there, but also things we need to be aware of.

Okay. Okay. I appreciate that context. And then just a follow-up, one more on the discretionary acreage acquisitions. You didn't guide to it at the start of the year and then you came out with a number a little bit bigger. John, can you sort of frame the opportunity set? Is this something you think can be perpetual? I know you need to have a seller to be a buyer. But how do we think about kind of this ground game of bolt-ons? Is that something that can be continued several years?

Yes, Tim, thanks for the question. I think I would point you to the last 3 years, we've ran a pretty land scouring program looking for these opportunities. And what I'll tell you is we've been extremely successful with prospecting and finding good opportunities adjacent to our current inventory and leasehold foothold. These prospects have ranged through Belmont, Monroe County and primarily in the wet gas area and the dry gas. So that's the high graded and these are the active targeted acquisitions that we're pursuing. What I'll tell you is we're pretty pleased and we've been pleased with the opportunity set just overall in general in the basin. We're certainly going to move towards acreage and inventory that we can shift to the left of the skyline and drill really quick. But I'll tell you that there's still significant and sufficient opportunities as you go throughout Monroe and Belmont up in the wet gas, dry gas. And even, quite frankly, we're agnostic to Southwest PA or even further north in Ohio. So plenty of opportunities out there. Very happy with the land teams' progress. They continue to assess and move very quickly on these opportunities to secure them. And we put the bid to them within 2 years, which really amps up the returns for this program. So it's a really good use of cash. So I appreciate the question. A lot of prospects out there and the land teams have done a good job identifying, securing them and the ops teams really are focused on prioritizing turning the bid on them and getting these converted to cash flow and producing assets.

There are no further questions at this time. I'd like to hand the floor back over to John Reinhart for any closing comments.

Thank you, everybody, for taking the time to join our call today. Should you have any questions, please don't hesitate to reach out to our Investor Relations team. This concludes our call. Have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.