GPOR - Gulfport Oil - Why?

[Guy Daley + 49]

I've done numerous internet searches trying to find the news that is depressing this stocks price.  It's not going bankrupt and at this point, it's barely trading at more than JC Penney which IS BANKRUPT.  Everytime the price of NG soars, it's share price is stagnant.  If the stock market goes down or energy commodities, it plummets even more.  LOTS of big institutional investors increased their stakes in this company 2nd quarter.  

It's trading as if:

1.  It's going bankrupt

2.  Lenders are going to eliminate it's revolving credit lines or

3.  It's debt has been downgraded to default.  

and yet natural gas prices have soared recently, coal mining is on the way out, drilling rigs have been reduced dramatically, LNG exports to Europe are picking up again and farmer's almanac warns of a brutally cold winter.  I own a number of other NG stocks and NONE of them are trading like they are going bankrupt.  

Anybody have ANY information as to why the share prices of gpor are so distressed?  Oh yeah and they made money last quarter at least on paper.  

Edited October 17, 2020 by Guy Daley

[Tom Nolan + 2,441]

I don''t have a clue.  You make some good points.  It may be worth a call to the company, because they probably have insight if there are some big shorts on the stock.

I have some shares in the ETF Boil     2x bull nattie gas.  I have been watching natural gas prices closely for a good while now.  It is nice to see prices go north.

My mineral rights royalty check this past quarter was much lower than previous quarters.  I have about 120 mineral rights in Oklahoma.

[Gerry Maddoux + 3,627]

Mr. Daley:

Gulfport is technically in "Specified Default." 

This occurred because on 10/8/20 their credit limit was summarily and unexpectedly reduced from $700M to $580M. 

There was a massive selloff on the news. This is happening all over the oil and gas basins. Pretty good companies run by hard-working men and women are going to fall victim to this, which is partly due to exogenous societal pressure (the young inheritors hate fossil fuels) and partly due to the fact that banks are getting ready for a Biden presidency, which means a massive stimulus for Green Energy. 

In my own portfolio I'm looking for not only oil and gas companies that have enough cash to bankroll their endeavors but are actively moving into becoming "Energy" companies, rather than "Oil & Gas" companies. I'm like you, I like gas, but most every American company is exposed to the whims of this election. I'm not pushing Total, the French company, but it is not only has low breakeven prices for oil ($30) but a great supply of NG with good LNG chains, and also is actively moving into renewables, frequently partnered with an American company (Google in solar mapping; owns a large American solar company whose name I can't recall) and is getting into wind (offshore Korea, Spain, etc), and storage batteries (Saft, the oldest battery concern). 

Anyway, due to rising natural gas prices--especially if Biden gets in--Gulfport will likely survive for now. If that's any consolation. But there is going to be an absolute financial takeover of oil and gas concerns, complete with their properties. Large companies (like Occidental) may not survive this war on oil and gas. 

[Guy Daley + 49]

5 hours ago, Gerry Maddoux said:

Mr. Daley:

Gulfport is technically in "Specified Default." 

This occurred because on 10/8/20 their credit limit was summarily and unexpectedly reduced from $700M to $580M. 

There was a massive selloff on the news. This is happening all over the oil and gas basins.

I saw that little tidbit of info but it shouldn't matter since they are not using the full amount of their credit limit.  The analogy is, that you have a 10K limit on your credit card, but you only spend up to about 4k.  But now your credit card company has reduced your limit to 8K.  It has no impact on you and the reduction in credit for Gulfport is irrelevant.  They USED to need the expanded credit limit in case they wanted to exploit their reserves.  No point at this NG price point.  

IN FACT, gpor made a bunch of money by buying bonds back at a big discount last quarter? or maybe previous quarter WHICH they had to count as income.  

No, its something more than that.  Gulfport trading at close to the same price as JC Penney is absurd.   But thanks for the reply.

 

[Gerry Maddoux + 3,627]

2 hours ago, Guy Daley said:

I saw that little tidbit of info but it shouldn't matter since they are not using the full amount of their credit limit.  The analogy is, that you have a 10K limit on your credit card, but you only spend up to about 4k.  But now your credit card company has reduced your limit to 8K.  It has no impact on you and the reduction in credit for Gulfport is irrelevant.  They USED to need the expanded credit limit in case they wanted to exploit their reserves.  No point at this NG price point.  

Not a "little tidbit." At least in my view. Their credit load is only $355M but they have obligations of $244M. 355+244=599, substantially above their newly adjusted credit limit. 

Nothing wrong with optimism. However, their situation looks analogous to Oasis, Extraction, Whiting and a whole list of companies that have gone bankrupt this year. I deal with about 30 companies and I get a new bankruptcy notice about once a month. This downward adjustment of credit limit has been the straw that broke the camel's back. Granted, the price of oil and gas was going down, not up.

I have no dog in this hunt.

[Guy Daley + 49]

"

13 hours ago, Gerry Maddoux said:

"Nothing wrong with optimism. However, their situation looks analogous to Oasis, Extraction, Whiting and a whole list of companies that have gone bankrupt this year. I deal with about 30 companies and I get a new bankruptcy notice about once a month. This downward adjustment of credit limit has been the straw that broke the camel's back. Granted, the price of oil and gas was going down, not up."

Thanks for the response but I don't use optimism as an investing strategy.  According to gpor's 10Q, they made $34,257,000 from debt extinguishment for the three months ended, June 30,2020.  Were bankruptcy the goal of a company, they wouldn't find ways to prematurely retire debt for less than they owed which is then considered a profit.  That sounds like sound financial management to me.  Their book value is MUCH, MUCH more than $.25 a share.  

Were I to guess the real reason for gpor trading like it had ALREADY filed bankruptcy is that it's just algorithms pushing the price ever lower and their is no conscious reason or logic at play.  Hertz which is in the process of bankruptcy lept $1.47 a share to $2.50 based on the news that someone was willing to lend them more money.  People aren't buying more stock because Hertz is becoming more indebted while filing bankruptcy.  Algorithms drove the price higher from the high frequency trading based on the algorithm considering this "good news".  

My issue with the price of gpor right now, is that somebody knows something I don't and I simply can't find it in the new stream.  Maybe because it's not there and this is all computer driven.  Look at the price of British Petroleum vs renewable energies stocks with absurd P/Es or no P/E at all.  


 

 

[Hotone + 412]

18 minutes ago, Guy Daley said:

"

 

https://m.moodys.com/research/Moodys-downgrades-Gulfport-notes-to-Ca--PR_434646

[Guy Daley + 49]

18 minutes ago, Hotone said:

https://m.moodys.com/research/Moodys-downgrades-Gulfport-notes-to-Ca--PR_434646

Okay, well that's it right there.  DAYUM, why doesn't that get reported anywhere?  So they have 30 days in which to cobble together a plan to make that interest payment.  THANKS for the sleuthing Hotone.   P.S.  It finally made it to Yahoo finance and I checked that yesterday.  

"These rating actions follow the company's announcement[1] that it elected to enter into a 30-day grace period and defer making the interest payment due October 15, 2020 with respect to its 6.000% senior unsecured notes due 2024, and that it has entered into forbearance agreement related to its senior secured credit facility.

 

Edited October 18, 2020 by Guy Daley

[Tom Nolan + 2,441]

October 21st Wednesday UPDATE

EXCERPTS

Are There Any Stocks to Buy?

Then there is Gulfport Energy Corporation GPOR. The company's asset base — primarily focused on natural gas — is concentrated on the Utica Shale of Ohio and the SCOOP play in Oklahoma.

Gulfport has a combined inventory in excess of 3,000 gross drilling locations in its two primary plays. Of Gulfport’s total output, nearly 90% comprises natural gas. Robust execution and strong performance should aid Gulfport’s performance going forward. The Zacks Rank #2 (Buy) stock has lost 14.8% over the past six months.

From ZACKS

Here's Why Natural Gas Is on the Verge of Breaking Above $3

https://www.yahoo.com/news/heres-why-natural-gas-verge-122012477.html

[Eric Gagen + 713]

On 10/21/2020 at 9:03 AM, Tom Nolan said:

October 21st Wednesday UPDATE

EXCERPTS

Are There Any Stocks to Buy?

Then there is Gulfport Energy Corporation GPOR. The company's asset base — primarily focused on natural gas — is concentrated on the Utica Shale of Ohio and the SCOOP play in Oklahoma.

Gulfport has a combined inventory in excess of 3,000 gross drilling locations in its two primary plays. Of Gulfport’s total output, nearly 90% comprises natural gas. Robust execution and strong performance should aid Gulfport’s performance going forward. The Zacks Rank #2 (Buy) stock has lost 14.8% over the past six months.

From ZACKS

Here's Why Natural Gas Is on the Verge of Breaking Above $3

https://www.yahoo.com/news/heres-why-natural-gas-verge-122012477.html

One important caveat to remember is that the price of natural gas is at the Henry Hub in Louisiana.  Gas coming from Oklahoma and the Appalachian basin isn't getting a price anywhere near that high.  Appalachian natural gas production levels have exceeded demand for every place which it can reasonably reach by pipeline and depressed the actual price which producers are receiving for it.  Oklahoma natural gas producers are in a similar situation because demand at the Henry Hub price is being met by producers in the Haynesville, Eagleford and other areas which are geographically closer to the hub.

Simply put,  Gulfport isn't going to get $3 for ANY of the natural gas that it produces because it's coming from the wrong places.  

[Tom Nolan + 2,441]

1 hour ago, Eric Gagen said:

One important caveat to remember is that the price of natural gas is at the Henry Hub in Louisiana.  Gas coming from Oklahoma and the Appalachian basin isn't getting a price anywhere near that high.  Appalachian natural gas production levels have exceeded demand for every place which it can reasonably reach by pipeline and depressed the actual price which producers are receiving for it.  Oklahoma natural gas producers are in a similar situation because demand at the Henry Hub price is being met by producers in the Haynesville, Eagleford and other areas which are geographically closer to the hub.

Simply put,  Gulfport isn't going to get $3 for ANY of the natural gas that it produces because it's coming from the wrong places.  

Excellent points.  Thanks Eric.

Anytime I see an article on a News Outlet which mentions a company by name, I hold the article at "suspect".  There are so many articles which are a marketing strategy, not really fact based news.

[Guy Daley + 49]

Addendum:

https://finance.yahoo.com/news/gulfport-files-bankruptcy-gas-m-120141205.html

I'm not a corporate accounting guru or a historical corporate guru.  It's a chapter 11 rather than a chapter 7 which is liquidation.  Hertz filed bankrutpcy and the stock soared but it is a completely different industry than NG.  The tourism industry is being destroyed.  You can't destroy NG because homes and businesses must be heated and electricity must be generated.  Nobody needs to rent a super expensive car from Hertz when you can hail Uber or Lyft.  

Yes, I have a significant investment in gpor and I will sit on it.  No point in liquidating at this point if it has a chance at reemerging after bankruptcy.  The whole purpose of the bankruptcy was to SHRINK the debt and a large percentage of it is UNSECURED.

"The largest unsecured creditor is UBM Financial Corp. which holds about $1.8 billion of notes due 2023 to 2026, according to the filing."

The 1.8 billion is far greater than the equity capitalization at this point.