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Utica driller Gulfport's foray into Oklahoma's SCOOP reveals 'future upside'

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Utica driller Gulfport's foray into Oklahoma's SCOOP reveals 'future upside'

Analysts were encouraged by a set of strong well results from Utica Shale driller Gulfport Energy Corp.'s early efforts in the stacked plays of Oklahoma's SCOOP formation as it seeks to diversify away from its dominant position in Ohio's Utica Shale.

Gulfport said a set of eight Woodford Shale wet gas wells were outperforming initial estimates at 60 and 90 days, while one of its first stabs into the oil window of the Springer Shale, just above the Woodford, produced 780 barrels of oil equivalent per day, 79% of which was oil.

All the wells are in Grady County, Okla., southwest of Oklahoma City, on a leasehold the company purchased in December as part of its attempt to expand operations beyond its Utica core.

The Springer oil well's results are good news for Gulfport, Capital One Securities Inc. analyst Brian Velie told his clients Nov. 28. "The initial Springer well's 79% oil and 11% NGL cut combine for 90% liquids," Velie said. "This is a stronger and oilier start for the Springer formation than company expectations. The Woodford rates also remain above type curve expectations but are not surprising considering the already released 30-day rates."

"We do not currently carry any Springer value in our $21/share [net asset value] but will closely monitor the progress of the Lauper 4-26H well," Velie added. "[Gulfport's] estimated 70 net Springer oil well locations and 72 net Springer gas condensate locations represent potential future upside in the case of continued success."

Gulfport shares were up 1.5% at $12.40 by midday Nov. 28.

The Lauper 4-26H Springer well was drilled with a short 4,527-foot lateral, Gulfport said, and produced roughly 172 boe per 1,000 feet of lateral. If the well had been drilled with Gulfport's standard 7,500-foot lateral, it would have been expected to produce 1,293 boe/d, the company said.

Longtime gas analyst Gabriele Sorbara of Williams Capital Group LP said the 60-day performance of Gulfport's Woodford Shale wells confirms Gulfport as his top natural gas pick, but he also liked the Springer oil news.

"On average, the [Woodford] wells are holding up and outperforming offset wells and type curves," Sorbara told his clients Nov. 27. "While the company's primary target remains the Woodford, we believe this initial success in the Springer validates the company's potential inventory identified at 354 gross/70 net locations. [Gulfport] may have another Springer test in 2018."

Gulfport said 60-day results from six of the eight Woodford wells had production averaging 15.2 MMcfe/d, with just over 50% being gas and the remainder split between oil and NGLs. Two other Woodford wells had production volumes averaging 15.9 MMcfe/d, split 79% gas, 19% NGLs, and 2% oil, Gulfport said.

"Expect a muted reaction to the release of a 24-hour peak [initial production] rate from Gulfport's first Springer formation test," Mizuho Securities USA LLC analyst Tim Rezvan said in a note before the market opened. "[I]t is a positive first result, and we expect additional delineation work to be conducted in '18."