Ohio Utica’s Gulfport Energy Signals Potential M&A This Year

Large Utica shale operator Gulfport Energy alerted investors that M&A could be one use of its free cash flow this year.

The comment comes while Gulfport neighbors Ascent Resources and Encino Energy are reportedly in play. Both are privately held.

Advisory firm Energy Advisors Group wrote recently, “With [the] higher gas price, 2025 [will be] likely more active as PE-backed firms like Ascent [Resources] and Encino [Energy are] considering exit or IPO."

Another of the Utica’s Top 5 producers, Infinity Natural Resources, IPO’ed earlier this year. Ascent Resources is an Oklahoma City neighbor of Gulfport’s. Encino Energy is based in Houston.

John Reinhart, Gulfport president and CEO, said on a May 7 call, “We continue to assess the landscape and remain optimistic about the opportunities to meaningfully increase our leasehold footprint to enhance resource depth and believe these opportunities rank very high as we evaluate uses of free cash flow in 2025.”

He made the comment during his prepared remarks.

A securities analyst noted in the subsequent Q&A, “Typically, CEOs don't state that by accident in their comments.”

As the oil market is in turmoil—since WTI has fallen to $58 at press time—“A&D is probably stuck in the mud,” the analyst, Tim Rezvan with KeyBanc Capital Markets, said.

“What gives you optimism that you may have an opportunity in front of you?”

Reinhart said Gulfport’s deal team is looking “through the landscape in Ohio” for property and “currently assessing” what would be a fit.

Historically, Gulfport develops its land acquisitions within two years, he said.

“As we look at the landscape, we favor right now the dry-gas and the wet-gas areas” of the Utica, where Gulfport holds 193,000 net acres, including in the oil window.

But “I would also not rule out any kind of investment pickups in the condensate window,” he said.

“… We're pretty excited about the opportunities that are out there. We continuously assess and throughout the year we'll have more updates on the progress that the land teams will achieve.”

Deal pricing

Hart Energy reported March 7 that Ascent told investors it would consider an IPO.

In response to a Hart Energy social media post of an April 7 article on newly public Infinity, an X user, @AndUpstream, wrote, “I’ve long awaited someone locking Ascent, Encino and Gulfport management teams in a room with nothing but a hammer until only one management team is left.”

M&A advisors have reported that dealmaking has slowed for oily property as prices are plummeting. Meanwhile, significant natural gas deals haven’t been signed yet, while Henry Hub has found a new, higher footing at a $4-plus strip since exiting this past winter’s draw.

Reinhart said, though, “We're not seeing a major appreciation in price out there. With the market volatility, it's been relatively flat.”

Still, any deal would have to be at an “extremely attractive price to be able to warrant our capital allocation.”

Another analyst asked if there is potential for “larger scale M&A” in the Appalachian Basin “and how Gulfport fits into that.”

Reinhart said, “As opportunities arise—and they come in, certainly, multiple forms—we'll assess anything that would be potentially accretive to the shareholders.”

The bar is high, but “we certainly remain open.”

Gabriele Sorbara, an analyst with Siebert Williams Shank, noted before the call that Gulfport uses all of its free cash flow to buy back shares, unless it has land or other acquisition opportunities.

Gulfport reported it hasn’t made land acquisitions yet this year.

After using $60 million for share buybacks in the first quarter and having no acquisitions, it has $356 million remaining in its buyback authorization, Sorbara wrote.

The E&P’s net debt is $695 million, including $650 million of senior notes due in 2029 and $35 million in bank debt on its $1 billion line of credit.

Net debt to EBITDA is 0.9x; total liquidity, $907 million, Sorbara calculated.