SunTrust Robinson Humphrey, Inc. – the full-service corporate and investment banking arm of SunTrust Banks Inc. – reported Jan. 24 that it is raising Gulfport Energy Corporation’s (GPOR’s) price target on increased Utica expectations.
SunTrust reported that higher Utica well assumptions increase 2014 production estimates, “which raises our cash flow and drives price target higher. We have increased our 2014 production estimate to ~44 Mboe/d from ~39.0 Mboe/d after factoring in increased well economics. Although the Utica is in the early stages, Gulfport appears to be best-positioned in the play. We have increased our price target from $54.00 to $60.00, derived using our 2014 forecasted CFPS of $13.21 (previously $11.96) applied to a slight premium to the peer-group multiple of 4.0x.”
Visiting the Utica shale play in late January, SunTrust said that a number of Gulfport’s Utica wellsites showed “significant results and how far ahead the company is versus peers in terms of product delivery. A number of oil trucks coming and going at the Boy Scout well was a nice sight. We look for a couple more big well results soon and the tie-in of at least three more wells shortly.”
Although Gulfport has not released well depletion rates yet, SunTrust said it was “confident they are around 63% for the first year. Our depletion estimates help generate an EUR of ~3 MMBOE versus a ~1 MMBOE Street estimate.”
SunTrust said that downspacing could add numerous incremental drilling locations, and that Gulfport plans to test 250-feet spacing between some of its Utica wells. If this exercise is successful, SunTrust predicted the company could see the number of gross locations quadruple to over 3,400.
With regard to optimum design and completion, SunTrust said it was beginning to appear that a lateral of around 6,000 feet and an average frac stage length of 225 feet seemed best, resulting in about 27 frac stages per well.
SunTrust concluded, “There continues to be no other company like Gulfport, which we think is likely to grow production by over 200% this year while spending around cash flow.”
GPOR price (Jan. 24, 2013) $41.71
