Peyton Dorne

Peyton Dorne asked about Gulfport Energy's drilling efficiency gains, their drivers, and the slight step back in completion efficiency in 2025, inquiring about plans for 2026. He also sought details on the $15 million base improvement spending budgeted for 2026, how it differs from normal workover spending, and its expected impact on the base decline rate.

Answer

EVP and COO Matthew Rucker attributed drilling gains to top hole efficiencies and slight improvements in curve/lateral, shaving days per well. He explained the 2025 completion dip was due to water sourcing issues from a drought and increased use of spot crews, expecting 2026 to return to or exceed 18 hours pumping per day. President and CEO John Reinhart described the base improvement spending as highly economic projects (less than 12 months payout) aimed at incrementally flattening base production, supporting the base decline, and increasing it over time, noting it's a larger program than in 2025.

Peyton Dorne asked about the drivers behind Gulfport Energy's drilling efficiency gains in 2025 and the company's plans to improve completion efficiency in 2026 after a slight decline in 2025. He also sought details on the $15 million base improvement spending budgeted for 2026, how it differs from normal workover spending, and its expected impact on the base decline rate.

Answer

Matthew Rucker, Executive Vice President and Chief Operating Officer, attributed drilling gains to top hole efficiencies and incremental improvements in curve/lateral drilling. For completions, he noted a dip in 2025 due to water sourcing issues and spot crew work, but expects 2026 to be at or above 18 hours pumping per day. John Reinhart, President and Chief Executive Officer, explained that the base improvement projects are highly economic, targeting less than 12-month payouts, and are aimed at incrementally flattening base production and supporting the base decline to achieve quarter-over-quarter exit growth.

Peyton Dorne of UBS asked for more color on the production volume trajectory heading into 2026, given the planned activity slowdown in the latter half of 2025. He also questioned if Gulfport might consider instituting a base dividend in the future to preserve its public float and trading liquidity, a theme highlighted in the preferred stock redemption announcement.

Answer

CEO John Reinhart projected a production volume increase of approximately 10% in Q3, followed by a relatively flat Q4, establishing a strong and stable production base entering 2026. EVP & CFO Michael Hodges addressed the dividend question, stating that while it's monitored, the management team and board are highly satisfied with the value created by the share repurchase program and believe it remains the most attractive use of capital, so the strategy is unlikely to change for now.

Peyton Dorne asked for expectations regarding the shape of Magnolia's 2026 production outlook, beyond the first quarter's weather impacts, to understand if a steady growth rate is anticipated throughout the year.

Answer

Chris Stavros, Chairman, President, and CEO, indicated that after the Q1 weather impacts, he expects gradual, steady progress in volumes through 2026. He noted that capital outlay would be heavier in the first half, particularly Q1, then taper off mid-year before rising again towards the end of the year.

Peyton Dorne of UBS requested clarification on the impact of new legislation on the company's cash tax rate for 2025 and 2026, and inquired about the potential for further reductions in operating costs.

Answer

CEO Christopher Stavros confirmed that cash taxes for 2025 are expected to be "negligible" and likely similar in 2026 under current commodity prices, a significant improvement. On operating costs, Stavros noted that while lower workover activity helped in Q2, ongoing field-level efficiency initiatives are also contributing. He guided for LOE to normalize around $5.25 per BOE but expressed hope for continued improvement.

Peyton Dorne asked for clarification on the minimal cash tax rate guidance for 2025 and 2026 following new legislation. He also questioned if further reductions in operating costs, particularly Lease Operating Expense (LOE), were possible after a strong Q2 performance.

Answer

CEO Christopher Stavros confirmed that cash taxes for 2025 would be "negligible" and likely similar in 2026 at current prices, a significant reduction from previous guidance. On operating costs, Stavros attributed the low Q2 LOE to a lighter workover quarter but also noted broad, ongoing improvements in field-level costs. He expects LOE to normalize around $5.25 per BOE, which is still lower than the prior year, with hopes for further improvement.